Modern banks (above, left) and shopping centers (above, right) cater to the needs of consumers and industry


      When the modern Kingdom of Saudi Arabia was established in 1932, the only way a visitor to any of the major urban centers could acquire additional money for personal or business use was to present a letter of credit from a trader back home to one in the city, and even that was not foolproof. Furthermore, the absence of a unified currency backed by the government provided major problems with money exchanging. Although this form of financial transaction was prevalent in many parts of the world at the time, it was obviously detrimental to commerce and impeded economic growth.

      Saudi Arabia’s overall development since that era has brought about major advances in finance and commerce, as well as social services, health, education, industry, agriculture and other fields. Banks use efficient modern technology, including wire transfers, automated teller machines (ATMs) and electronic banking, to provide the services needed by a dynamic economy and a vibrant commercial sector.

      The first steps along the road to this dramatic transformation were taken during the rule of the Kingdom’s founder, King Abdulaziz bin Abdulrahman Al-Saud, when the government began standardizing currency and issuing coins. The formation of the Saudi Arabian Monetary Agency (SAMA) in 1951 was a major step in the modernization of the nation’s financial affairs. Soon, the Kingdom had a single monetary system composed of riyals and halalas, and standardized coins and paper money were circulated throughout the country. SAMA, the country’s central bank, now helps set financial policy and controls money supply.

      The formation of modern banks accelerated in the 1950s and 1960s, and there are now nine private commercial banks with some 1,200 branches, and net capital and reserves of 12 billion dollars. These banks offer the full spectrum of financial services. Customers now hold more than 4.7 million debit cards and their transactions at ATMs are valued at more than 27 billion dollars a year. The net electronic payments made by bank customers now stand at more than 1.5 trillion dollars a year.

The National Commercial Bank in Jeddah is one of the oldest banks in the Kingdom.

      The Arabian Peninsula has been a center of commerce for centuries. The Kingdom’s rapid economic growth, however, has brought about a parallel expansion of the commercial sector, especially in the past three decades. Generous government incentives, including the provision of long-term interest-free loans and support services and facilities, have encouraged the rapid expansion of the commercial sector. The establishment of chambers of commerce and industry in the major cities and regions of the Kingdom has also promoted the formation of new, and expansion of existing, commercial companies. The existence of a modern banking industry capable of meeting the requirements of businesses large and small has further promoted commercial operations in recent years.

Banks provide all the modern services required by individual and corporate customers.

      As a result, there are currently some 9,800 firms, mostly joint stock companies, involved in commercial activities in the Kingdom. Their total invested capital is estimated to be more than 170 billion riyals (more than 45 billion dollars).

      These private sector companies account for some 48 percent of the nation’s gross domestic product (GDP) of 618 billion riyals (164.8 billion dollars). In addition to handling the manufacture, distribution and sale of domestic products, these companies also handle the bulk of imports of consumer and industrial goods, as well as much of the export of non-oil products. Saudi Arabia is among the top 20 exporters and import markets in the world. Exports of non-oil products to some 90 countries worldwide average some six billion dollars per year.

Benefiting from a modern infrastructure and access to all the necessary services, the commercial and banking sectors are expected to continue to expand in the coming decades.

       The future of the commercial sector looks promising. Saudi Arabia’s pending accession to the World Trade Organization (WTO) will boost commercial activity, as will the formation of free-trade zones that Saudi Arabia has undertaken with several nearby countries, including Egypt and Syria, and with fellow member states of the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.

      Saudi Arabia also has a thriving stock market, in which the total value of shares traded annually is some 60 billion riyals (16 billion dollars). At a time when stock markets around the world witnessed a decline in 2000, the Saudi market registered strong growth, largely as a result of the increase in economic activity and the improvement in the investment environment. The NCFEI share index increased 13 percent in 2000 to stand at 2,286 at the end of the year.

      Employing cutting-edge technology and staying abreast of the latest advances in management and operations, the Saudi commercial and banking sectors are poised for continued growth in the future.


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