Regulatory Alerts2017-10-12
Micro, Small and Medium Enterprises (MSMEs) Disclosures in the Annual Report
The Saudi Arabian Monetary Authority (SAMA) mandates that banks operating in the Kingdom incorporate quantitative and qualitative MSME disclosures into their annual board reports effective from 2017. The directive requires reporting approved MSME definitions, staff and customer training initiatives, and detailed loan metrics across micro, small, and medium categories for both current and previous financial years. Banks must utilize the prescribed reporting tables and FAQs, clearly noting any transitional adjustments when applying the updated definitions to historical data.
In the Name of Allah, the Most Gracious, the Most Merciful Saudi Arabian Monetary Authority (SAMA) Head Office
Banking Policies Department Ref: 391000007761 Date: 22/01/1439 Attachments: 2
Circular
To the Esteemed ................................................................................................., Greetings: Subject: Annual Disclosure of Data for Micro, Small and Medium Enterprises (MSMEs).
MSMEs play a vital role in contributing significantly to the gross domestic product of many global economies, with their contribution to advanced economies reaching approximately 70% of GDP, while their contribution in the Kingdom stands at around 20%. Diversifying revenue sources and increasing the non-oil sector's contribution to the Kingdom's economy are key objectives of Saudi Vision 2030. SAMA works with banks to review systems and regulations meticulously to remove obstacles and enhance the effectiveness of MSME units within operating banks in the Kingdom. Reference is also made to SAMA Circular No. 381000064902 dated 16/6/1438, which adopted the new definition of MSMEs. This definition was also endorsed by the General Authority for Small and Medium Enterprises to include micro-enterprises, along with introducing key performance indicators and adjusting prudential data for MSMEs, as per Circular No. 381000094106 dated 6/9/1438. In this regard, SAMA has introduced a report containing quantitative and qualitative data on MSMEs. Banks are required to include this in their annual board report starting from 2017, as attached in Annexure (I). Annexure (II) contains a list of answers to frequently asked questions on the subject. Should you have any questions or inquiries, please contact Mr. Yaser bin Mohammed Al-Omar (yalomar@sama.gov.sa) or Mr. Qaisar Noor (qnoor@sama.gov.sa).
Yours sincerely,
Ahmed bin Abdullah Al-Sheikh Deputy Governor for Supervision On behalf of: Hashim bin Uthman Al-Haqeel
Distribution Scope: Banks operating in the Kingdom. P.O. Box 2992, Riyadh 11169, Telegram: MARKAZI, Fax: 404400, Phone: 4666666
Annexure I
Micro, Small and Medium Size Enterprises (MSMEs) disclosures in the annual report
Qualitative disclosures Qualitative information on:
- Currently approved definition of MSMEs
- Initiatives for MSMEs taken by the Bank
- MSME unit and staff in the unit
MSMEs training initiatives and workshops for staffs and customers should be presented in the following format
| Number of *man-days training provided to staff | |
| Number of *man-days training provided to customers |
*Man-days means 8 hours per day.
Quantitative disclosures The below table for MSMEs is required for both current and previous years.
Current Year | All in SAR'000 :--- | :--- | :--- | :--- | :--- Details | Micro | Small | Medium | Total Loans to MSMEs – on Balance Sheet (B/S) | | | | Loans to MSMEs – off Balance Sheet (notional amount) | | | | On B/S MSMEs Loans as a %age of total on B/S loans | | | | Off B/S MSMEs Loans as a %age of total off B/S loans | | | | Number of loans (on and off) | | | | Number of customers for loans (on and off) | | | | Number of loans guaranteed by Kafalah program (on & off) | | | | Amount of loans guaranteed by Kafalah program (on & off) | | | |
Previous Year | All in SAR'000 :--- | :--- | :--- | :--- | :--- Details | Micro | Small | Medium | Total Loans to MSMEs – on Balance Sheet (B/S) | | | | Loans to MSMEs – off Balance Sheet | | | | On B/S MSMEs Loans as a %age of total on B/S loans | | | | Off B/S MSMEs Loans as a %age of total off B/S loans | | | | Number of loans (on and off) | | | | Number of customers for loans (on and off) | | | | Number of loans guaranteed by Kafalah program (on & off) | | | | Amount of loans guaranteed by Kafalah program (on & off) | | | |
Annexure II
Frequently Asked Questions (FAQ)
Q1: Should the quantitative MSME loan figures include both on and off balance sheet items?
A1: Yes, the figures should include both on and off balance sheet items. Off balance sheet items should be reported at notional amount. The rows have been expanded in the quantitative tables to include separate information for both on balance sheet and off balance sheet lines.
Q2: Should the bank apply the recently prescribed definition of MSME?
A2: The Banks should implement the recently prescribed definition of MSME as mentioned in the SAMA circular (381000064902) dated 16/6/1438 starting from 1 January 2018. If readily available, banks are encouraged to use new definition to populate these tables for 2017 annual report. If the banks don't have available data, they can report using the old definition under SAMA circular (29697\BCS\14849) dated 22/April/2012. However, in both cases, the banks should clarify this in the notes accompanying the tables.
Q3: Can banks include customer/staff training that last less than the pre-defined 8-hour Man-Day definition?