Kafalah program's efforts to reduce fees and interests of funding entities
Since its launching, the program has sought to contribute significantly to reducing bank fees and interest on entrepreneurs. During 2020, for the first time, detailed standards have been adopted that serve SMEs primarily, achieve benefiting from funding services and guarantee funding at the lowest cost and profitability. The Guaranteed Funding Initiative has been extended due to great demand of enterprises. Standards have been modified to meet the market’s need as shown below:
- Funding Guarantee: The Small & Medium Enterprises Loan Guarantee Program (Kafalah), for facilities granted through the program. The financing entities are not entitled to take in-kind guarantees. When taking cognizance of the chart below, we note that the financing ratio with a Kafalah guarantee only constitutes 86% of the total requests received from banks that show that the program does not require additional guarantees.
- Guarantee Ratio (Cover): Kafalah program guarantees 95% of funding amount according to guarantee caps approved by Kafalah program.
- Financing Cost: The total profits and fees charged by financing entities are not more than (4%) as maximum of funding value per year.
- Exemption Period: Beneficiaries receive payment exemption period not less than six months from date of funding.
- Funding Period: The funding period is 36 months as maximum, and benefiting opportunity can be granted several times in accordance with the Kafalah program policy.
- Funding Amount: There is no minimum and it is not more than higher limit of mechanisms adopted for Kafalah program. The program
The program seeks to benefit from this experience and maximize the economic impact of enterprises and thus enterprises’ increased contribution to GDP to 35% in 2030.
