Financing for smes in the KSA: A critical evaluation of their justification to and fulfilment of the purpose

Small and medium enterprises (SMEs) are immensely beneficial in developing diversified production as well service sectors in an economy. The Kingdom of Saudi Arabia (KSA) has witnessed a strong foothold of family run businesses in its society, though the sector remained deprived of economic attention for long. Currently, the Kingdom doesn't only seem to be recognising the importance of the SMEs, but also taking the initiatives needed to bolster their performance and growth in the economy. It has also made the development of SMEs as an integral goal of its 2010-2014 development plan. The step is also expected to diversify the nation's economy widely. Consequently, there is an increased upsurge in the credit schemes introduced by government specialized credit institutions as well as banks and other financial institutions, making it a formidable system of SMEs funding. Despite this, SMEs lending remains substantially low as a proportion of total lending in the Kingdom and the sector faces intimidating adversities limiting its capability to be competitive and hindering its sustained growth. This research project aims to analyse the effectiveness of SMEs financing in the Kingdom and evaluate its strengths and weaknesses in terms of meeting its targets. The researchers have identified that a sizable percentage of the SMEs have a short life span due to the lack of access to capital relevant to their particular stage of development and though the SMEs funding in the KSA seems to be well designed, it is falling short of serving the purpose. The research paper has also given suggestions for the improvement in the overall SMEs funding system in the KSA on the basis of the survey conducted among the senior executives, and loan managers of relevant organisations.