How to Obtain a Microfinance License in Saudi Arabia

In recent years, Saudi Arabia has experienced remarkable expansion in its financial services sector, notably within the fintech sphere. To adapt to this transformation, the Saudi Central Bank (SAMA) has rolled out a series of financial regulations dictating the licensing and operations of financial businesses. The microfinance market in Saudi Arabia was valued at $0.68 billion in 2021 and is forecasted to surge to $1.68 billion by 2031, with a robust compound annual growth rate (CAGR) of 9.4% from 2022 to 2031. This article will delve into the intricacies of obtaining a microfinance license in Saudi Arabia.

What are the governing regulations that you should be aware of?

  • Finance Companies Control Law
  • Real Estate Finance Law
  • Finance Lease Law
  • Implementing Regulation of the Finance Companies Control Law
  • Implementing Regulation of the Real Estate Finance Law
  • Implementing Regulation of the  Finance Lease Law
  • Implementing Regulation to the AML Law
  • Anti-Money Laundering Law
  • Circulars issued in the finance sector.
  • Guidelines for Applying for a License to Practice Finance Activities & refinancing.
  • Guidelines for Applying for a License to Engage in Consumer Microfinance Activity.
  • Guidelines for Applying for a License to Practice Finance Support Activities.
  • Guidelines for Applying for a License for Debt-Based Crowdfunding Activity.

Types of Licenses

The Types of licences that an applicant can apply for:

  • Real estate financing
  • Microfinancing
  • Other financing
    • Financing production assets
    • Financing small and medium businesses
    • Finance Lease
    • Credit Cards finance
    • Consumer finance
    • Other types of financing

What is Microfinance?

Microfinance entails providing financial support to fuel the productive endeavors and asset acquisition of small businesses, artisans, and similar entities, as regulated by the Finance Companies Control Law and its Implementing Regulation, along with any guidelines set forth by SAMA. It encompasses a range of financial services such as loans, savings, and insurance tailored for impoverished entrepreneurs and small business proprietors who lack collateral and may not meet the criteria for conventional bank loans.

Scope of  the Microfinance Licence

SAMA licenses Micro Finance Institutions (MFIs) to offer small secured or unsecured loans based on the following criteria:

  • Short duration of loans
  • Mission to women empowerment 
  • Islamic Microfinance system where loans are provided on mutual trust
  • Supports low income group
  • Short term interest free loans
  • No collateral is received from clients
  • A microfinance activity shall be limited to financing productive activities and assets of small business owners, craftsmen and the like. 
  • The microfinance company shall not provide consumer finance or engage in any other financing activities.
  • The amount of finance granted to a beneficiary of microfinance shall not exceed (100,000) one hundred thousand Saudi riyals. SAMA may raise the amount to (200,000) two hundred thousand Saudi riyals, whenever deemed necessary.

Eligibility Criteria

SAMA meticulously evaluates applications for Microfinance licenses, assessing various criteria to ensure regulatory compliance and operational capability. Key requirements include demonstrating the organizational structure, operational systems, and an investment plan aligned with regulatory standards. Organizational Structure: Applicants must provide details on their company's structure, operational systems, and investment plan to demonstrate their ability to engage in financial activities as per regulations.

    • Capital Requirements: The company's capital must meet the minimum amount set by SAMA and comply with the Companies Law. Foreign ownership in the capital cannot exceed 49% of the company's shares.
    • Minimum Capital: Microfinance companies must have a capital of at least ten million riyals (USD 2.7m).
    • Founder Eligibility: Each founding member must be legally competent and free from:
      • Defaulting on obligations to creditors
      • Violating laws related to Capital Markets, Banking, Insurance, or finance
      • Bankruptcy or conviction for crimes affecting integrity, unless rehabilitated
    • Personnel Requirements: Individuals nominated for monitoring and executive roles must:
      • Possess theoretical and practical knowledge in finance
      • Adhere to laws and regulations related to Capital Markets, Banking, Insurance, or finance
      • Not have convictions for crimes affecting integrity, unless rehabilitated
    • Compliance: Applicants must meet any additional conditions specified by regulations for obtaining the license.

How to apply

  1. Gather Required Documents: Prepare necessary documents, including the license application form, company letter requesting a license, founding contract, organizational structure diagram, Fit and Proper forms for shareholders and board members, irrevocable bank guarantee, and proof of commercial registration.
  2. Complete Application Form: Fill out the license application form accurately, providing detailed responses to all questions. Avoid abbreviations and ensure completeness of the form and accompanying documents.
  3. Submit Application: Submit the completed application form and supporting documents to SAMA via postal mail or email. Ensure all attachments are appropriately labelled and formatted.
  4. License Process: SAMA reviews and evaluates the application within 60 calendar days. Additional information may be requested during this period. If all conditions are met, SAMA may grant the license or provide in-principle approval, subject to further requirements.

Documentation Requirements

Document Type


License Application Form

Completed form approved by the organization

Company's Letter

Letter requesting a license for microfinance services, accompanied by shareholders' decisions

Founding Contract (AOA) and Company Bylaws

Copy of the founding contract (Articles of Association) and drafted company bylaws indicating ownership details

Organizational Structure Diagram

Diagram outlining the organisational structure, including details of the board structure and senior management positions

Fit and Proper Form

Form for each founding shareholder and board member as specified by SAMA, including IDs and CVs

Business Details

Balance sheet, Income Statement, Cash Flows, Ratios etc.
Target Market
Value Proposition
Exuection operations plan

Human Resource Plan

Irrevocable Bank Guarantee

Providing a bank guarantee of an amount equal to the maximum amount that the company is intending to carry for finance activities, issued in favor of SAMA from a local bank

Additional Supporting Documents

Any other documents supporting the license application as per Finance Companies Control Laws

Application Processing time

Upon receiving a completed application, SAMA commits to providing a decision of approval or reasoned rejection within 60 days. In its decision-making process, SAMA considers factors such as industry competitiveness, integrity, and service quality.

Following the issuance of the license, the finance company is required to commence its finance activities within one year. Once activities begin, the company must not halt operations for more than three successive months without approval from SAMA.

AML and Fraud Considerations

AML laws in Saudi Arabia are governed by the Anti-Money Laundering Law and its Implementing Regulations, aligned with international standards. Microfinancing Institutions must strictly adhere to the following requirements:

  • Utilization of a risk-based assessment model: This model involves assessing risk indicators associated with combating money laundering and terrorist financing.
  • Analysis of risk indicators: Comprehensive analysis of various risk indicators is conducted to identify potential instances of money laundering or terrorist financing activities.
  • Regular updating of AML/CFT risk assessment: The AML/CFT risk assessment is periodically reviewed and updated to ensure it remains relevant and reflective of current risks and trends.
  • Conducting inspection visits to financial institutions: Inspection visits are carried out to assess the compliance of financial institutions with AML and Counter-Terrorist Financing (CTF) regulations and to identify any areas for improvement.
  • Monitoring and enhancing compliance within the financial sector: Ongoing monitoring efforts are focused on ensuring financial institutions adhere to AML-CTF laws and regulations. This includes verifying the effectiveness and transparency of implementation measures aimed at preventing money laundering and terrorist financing activities.


Obtaining a microfinance license in Saudi Arabia requires adherence to stringent criteria set forth by the Saudi Arabian Monetary Authority (SAMA). Applicants must demonstrate organizational structure, sufficient capital, and compliance with legal and regulatory requirements. The licensing process involves a thorough evaluation by SAMA, ensuring that only eligible entities are granted licenses to engage in microfinance activities. 

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