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2018-02-21

The Finance of MSMEs Based on Cash Flows Through Mada POS Terminals

The Saudi Central Bank has activated technical settings in its Terminal Management System (TMS) to enable operating banks to finance Micro, Small and Medium Enterprises (MSMEs) exclusively based on cash flows processed through Mada POS terminals. Banks must restrict this TMS feature to such financing contracts, exclude it from other commitments requiring multiple additional guarantees, and verify whether an enterprise already holds existing cash-flow-based financing before establishing a new POS agreement. This circular mandates compliance with these operational parameters to align banking practices with the Kingdom’s Vision 2030 objectives for MSME sector growth.

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Saudi Arabia

Saudi Central Bank

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In the Name of Allah, the Most Gracious, the Most Merciful

Saudi Central Bank Head Office

Banking Policy Department Ref. No.: 391000064531 Date: 1439/06/05 Enclosures: -

Circular

To: His Excellency, [Name] Greetings,

Subject: Financing of Micro, Small and Medium Enterprises (MSMEs) Based on Cash Flows Through Point-of-Sale (POS) Terminals (Mada).

In line with the Kingdom’s Vision 2030 to support MSME sectors as vital drivers of the Kingdom’s economic prosperity, and in the Bank’s commitment to supporting banking sector initiatives related to this important sector.

We wish to inform you that the Bank has recently activated certain technical settings in its central system (Terminal Management System - TMS) to support the MSME sector by enabling operating banks in the Kingdom to finance these enterprises based on the volume/value of cash flows executed through POS (Mada) terminals only, for the period specified in the contract. The Bank has provided a new feature that enables all banks to determine whether an enterprise (store) has an existing financing commitment related to cash flows through POS terminals with another bank before contracting with it to provide POS (Mada) services.

Accordingly, we hope for compliance with the following:

  1. Utilize the feature applied to the TMS system exclusively for financing contracts of MSMEs that rely solely on cash flows through POS (Mada) terminals.
  2. Banks must not use this feature for other financial commitments that require multiple additional guarantees, even if the service is among those mentioned in the contract and the enterprise (merchant) is required to utilize it.
  3. When granting the aforementioned financing, consideration must be given to whether there are existing financings that rely on the enterprise’s cash flows.

For information and action as of its date. Yours sincerely,

Ahmed bin Abdullah Al-Sheikh Deputy Governor for Supervision

Distribution Scope:

  • Operating banks and financial institutions in the Kingdom.

P.O. Box 2992, Riyadh 11169, Telegram: MARKAZI, Telex: 404400, Tel: 4633000, Fax: 4662414

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