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2022-08-31

Emphasis on Applying the Method for Calculating Government Subsidies Provided by the Ministry of Municipal and Rural Affairs and Housing or the Real Estate Development Fund

The Saudi Central Bank mandates that licensed financial institutions exclude recurring government subsidies from the Ministry of Municipal and Rural Affairs and Housing or the Real Estate Development Fund when calculating a customer’s total monthly income for affordability assessments under the Personal Financing Principles. This directive clarifies that only periodic, cash-based subsidies qualify for exclusion, while non-financial and non-periodic allowances remain included in the income calculation. Consequently, borrowers receiving these specific government subsidies will benefit from improved affordability ratios and enhanced access to personal financing.

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Saudi Arabia

Saudi Central Bank

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Saudi Central Bank (SAMA)
Reference No.: 44069058
Date: 1444/02/04 (AH)
Attachments: None

Circular

To Whom It May Concern, Dear Sirs/Madams,

Greetings, peace, mercy and blessings of Allah be upon you.

Subject: Emphasis on the mechanism for calculating government subsidies provided by the Ministry of Municipal and Rural Affairs and Housing or the Real Estate Development Fund in accordance with the Personal Financing Principles.

Based on the authorities granted to SAMA under its system, issued by Royal Decree No. (36/M) dated 1442/6/11 AH, and pursuant to related regulations, and the Personal Financing Principles (the "Principles"), issued under Circular No. (679/99) dated 1439/9/2 AH, and amended by Circular No. (679/1) dated 1439/9/9 AH, SAMA supports the emphasis on compliance with the Principles' provisions, as follows:

First: Emphasis on compliance with Article (14/C) of the Principles, which stipulates that government allowances received by a customer shall not be included in the customer's total monthly income, except for recurring government subsidies provided by the Ministry of Municipal and Rural Affairs and Housing or the Real Estate Development Fund, disbursed as periodic amounts. Non-financial subsidies and non-periodic amounts are excluded from the customer's total monthly income.

Second: Emphasis that the affordability ratio specified in Article (15/C) for customers benefiting from the Ministry of Municipal and Rural Affairs and Housing or the Real Estate Development Fund shall be calculated based on the customer's total monthly income, provided that subsidy amounts are disbursed on a monthly basis.

For information and necessary action.
Yours faithfully,

Yazid bin Ahmed Al-Sheikh
Deputy Governor for Supervision

Distribution Scope:

  • Banks and general banks in the Kingdom
  • Financing companies operating in the Kingdom
  • Credit information companies
  • The General Secretariat of Committees for Banking and Financing Disputes and Violations

P.O. Box 2992 Riyadh 11169, Kingdom of Saudi Arabia Tel: +966 11 463 3000
P.O. Box 2992 Riyadh 11169, Kingdom of Saudi Arabia Tel: +966 11 463 3000

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