Updated: Apr 18
Today's episode is going to focus on Saudi Arabia - that's because last week, the Saudi Arabian Monetary Authority (SAMA) made several announcements that were all very forward-thinking when it comes to FinTech and innovation. To give you a bit of context on why this is a big deal, SAMA had traditionally been pretty conservative, especially compared to its neighboring regulators in Bahrain and the UAE. So, I thought it was worth giving you all a recap of the updates, as well as a deep-dive on how you would get started with doing business there from a cultural point of view.
First and foremost, SAMA has granted its first micro-lending license. Micro-loans are effectively loans that are "small" in value. FinTechs around the world have recently been issuing micro-loans to people who wouldn't ordinarily be able to obtain a line of credit from a bank, in the fight for financial inclusion (and also business profits). Because issuing micro-loans is risky business, most regulators in the MENA region have not granted licenses for FinTechs to issue these services in the region, until now.
Other announcements SAMA has recently made include issuing crowdfunding and robo-advisory licenses to FinTechs, as well as a payments license to a telecommunications company (Virgin Mobile). However, the biggest announcement of it all was a plan to finally permit open banking activities within the Kingdom.
Let's zoom in on Open Banking for a minute. Open banking is embraced in some countries that are deemed forward-thinking financial markets (such as the United Kingdom). That's not to say that all "Western" markets permit this activity; the United States, for example, does not. It is effectively when a financial regulator permits or even mandates banks to expose their APIs because other companies can benefit by plugging in and accessing their data. The type of companies that would like to do so tend to be FinTech companies who build their own products around the data that they pull through these APIs.
Within the GCC, the Bahrain Central Bank was the first to mandate open banking; but, no one knew where the other regulators stood as of yet.
Now why does KSA even matter? Because it is by far the largest consumer market in the GCC. That's natural because it's the largest in terms of geographical space as well as population. So, naturally, any startup that wants to reach "unicorn" status - and let's face it, who doesn't? - will need to access the KSA market at some point or another.
To help entrepreneurs break into the KSA market, we bring to you an episode dedicated to shedding some light on the business norms and cultures of the Kingdom.
In our latest episode, we had an engaging conversation with Nouf Alharthi. Nouf works for Monsha'at, which is the General Authority for Small and Medium Enterprises in the Kingdom of Saudi Arabia (KSA). She is an enabler in the ecosystem and works very closely not just with other ecosystem players but also with entrepreneurs in order to assess what they need in the market and to make sure that it is provided to them.
Together we discuss:
Preferred language of communication in Saudi Arabia
How to communicate with Saudis when doing business within the Kingdom
Mannerisms to adapt during business meetings
Saudi's unique startup demographics
Arabic is the preferred language of communication
To do business in KSA, speaking Arabic is essential. In more recent years, KSA’s business world has been more exposed to working and interacting with foreigners, which means local Saudis have become accustomed to using English in the workplace. In fact, Gen Zs and younger default to English more commonly.
WhatsApp gets more than personal when it comes to business
Globally, especially outside KSA, emails are typically the most professional way to contact your business colleagues and partners. But that's not how things are done in KSA! They tend to use WhatsApp more since it’s faster and easier. People need answers in the blink of an eye, and apparently emailing is too slow. Many people have two phones to separate work and personal communication. It is easier to share your number with everyone you might have to do business with if you have a phone dedicated to it!
People communicate through WhatsApp because they want answers in the blink of an eye
Keep it formal with governmental entities
Adapt to the business culture of people working in KSA's government entities by addressing them formally. However, when not doing business with someone from the government, it is okay to be casual.
Saudis prefer to meet in person to build a relationship and then get down to business. There are dedicated business associations that encourage and plan meetups for the purpose of business networking.
Monsha'at, hosts dedicated events, such as the Biban Expo, which is a nation-wide expo that takes place in different major cities of Saudi with international keynote speakers and businesses. The main purpose of such events is to enhance the entrepreneurial ecosystem, raise awareness about different businesses, and bring together entrepreneurs. Embrace sharing your ideas, people are more likely to help you than beat you to it.
Start-up profiles vary across different regions of KSA
In Jeddah (in the West), most entrepreneurs tend to specialize in creativity-based businesses (such as media and fashion), whereas in Damman (in the East), most entrepreneurs focus on energy-based businesses. In southern KSA, there is a rise in agricultural technologies due to the milder (less humid). However, as Riyadh is the capital and in the center of the country, you'll tend to find that it's a melting pot of all types of startups, and is the focal point of the financial industry.
Nevertheless, across Saudi Arabia as a whole, most entrepreneurs you will encounter will be under the age of 40 as the country's demographics skew towards a very youthful population.
Until next time,