The following terms and phrases – wherever mentioned in this Regulation – shall have the meanings assigned thereto unless the context requires otherwise:

Law: Finance Companies Control Law.

Finance Laws: Real Estate Finance Law, Finance Lease Law and Finance Companies Control Law.

Regulation: Implementing Regulation of the Finance Companies Control Law.

SAMA: Saudi Central Bank.

Governor: Governor of Saudi Central Bank.

Finance Company: A joint stock company licensed to engage in finance activities.

Borrower: A person receiving finance.

Consumer: A person to whom finance services are offered.

License: A license issued by Saudi Central Bank. to a company to engage in finance activities.

Finance Activity/Activities: One or more types of finance activities stated in Article 10 of the Law or any other finance activities

approved by Saudi Central Bank. pursuant to the same Article.

Finance: Extending credit under contracts for activities stipulated in the Law and the Regulation.

Finance Contract: A contract under which the finance company extends credit for activities stipulated in the Law and the Regulation.

Installment: The total amount payable by the borrower distributed over the term of the finance contract, excluding non-recurring

expenditures, expenses and costs such as charges, commissions and administrative fees.

Term Cost: The term cost paid by the borrower under the finance contract which may be reflected by a fixed or variable annual

percentage of the amount of finance obtained by the borrower.

Total Finance Cost: Costs to be paid by the borrower under a finance contract other than the finance amount in accordance with

the provisions of the finance contract. Such costs include term cost, charges, commissions, administrative fees, insurance, and any

expenses required to obtain finance, excluding any expenses the borrower can avoid such as costs or fees payable by the borrower

due to his breach of any of his obligations stipulated in the finance contract.

Finance Amount: The maximum or total amounts available to the borrower under a finance contract.

Total Amount Payable by the Borrower: The finance amount in addition to the total finance cost.

Annual Percentage Rate (APR): The deduction rate calculated in accordance with the provisions of Article 81 of this Regulation.

Board of Directors: Board of directors of the finance company.

Senior Management: The managing director, chief executive officer, general manager and their deputies as well as the chief

financial officer and heads of major departments, in addition to risk management, internal audit and compliance officers in the

finance company.

Exposure: The value of an asset that is subject to any credit risks, such as default or credit rating downgrade.

Large Exposure: The exposure of a single borrower by five percent or more of the paid capital and reserves of the finance company.

Qualifying Percentage: Five percent or more of the shares or the voting rights related to the finance company shares whether held

directly or indirectly by one or several persons acting in agreement.

• SAMA shall be in charge of the finance sector and shall supervise the activities of finance companies in accordance with the Law and the Regulation, including the following:

• 1. Extend license to engage in one or more finance activities in accordance with the provisions of finance laws and their regulations;

• 2. Taking necessary measures for maintaining the integrity and stability of the finance sector and fairness of transactions;

• 3. Take necessary measures for promoting fair and effective competition between finance companies;

• 4. Issue required rules and instructions to regulate the finance sector; and

• 5. Take proper means for the development of the finance sector, Saudization, and raising the employees' competency through regulating the obligations of the finance companies regarding the training of human resources, improving their skills and developing their knowledge.

• These regulations apply to every legal entity licensed to engage in one or more financial activities stipulated in Article Ten of the Law or any other financial activity approved by the Authority in accordance with the same article, including refinancing activities.

No person shall engage in any financing activity except after obtaining a license from the Authority in accordance with the system and the regulations or other applicable regulations. The Authority may exempt certain operations and activities from some provisions stipulated in these regulations if it deems that their nature or size warrants such exemption.

• The financing of a natural or legal person for the goods of their establishments or their services to their clients is subject to the provisions of the Installment Sale Law.

• A finance company shall not engage in any activity for which it is not licensed under finance laws and their regulations.

• Founding shareholders of a finance company, or representatives, shall apply to SAMA for a license. The application shall specify the activities for which the license is requested, and shall include the following:

• 1. A completed SAMA-approved application form;

• 2. Draft articles of association and charter of the finance company;

• 3. Description of the organizational structure of the finance company showing all primary departments and positions and main functions thereof;

• 4. List of all founding shareholders specifying the number and percentage of shares for each;

• 5. Fit and proper form for founding shareholders signed by each founding shareholder;

• 6. Fit and proper form for board members signed by each candidate for board membership;

• 7. Feasibility study identifying the target market, services to be provided, business model, and strategy of the finance company in addition to a fiveyear business plan that includes at least the following:

  • a) finance activities, for which a license is requested, as well as products and a marketing plan;

  • b) credit extending policies and procedures;

  • c) estimated financial statements, projected annual revenues and expenses, financial margins and targeted growth rates, taking into account SAMA requirements of capital adequacy and liquidity;

  • d) projected start-up costs and required finance;

  • e) projected ongoing finance of operations;

  • f) branches to be established by the finance company;

  • g) plan and programs for monitoring and managing risks and compliance; and

  • h) recruitment and training plan, including the projected number of employees and percentage of Saudi nationals at each department and administrative level, and employee training and qualification programs.

• 8. An irrevocable letter of guarantee issued to SAMA by one of the local banks for an amount equivalent to the required minimum capital for the finance activity/activities requested to be licensed according to the form set by SAMA. Such a letter of guarantee is renewable automatically until the required capital is paid in full, and shall be released upon the request of the founding shareholders in the following cases:

  • a) payment of the capital in cash.

  • b) withdrawal of the license application.

  • c) rejection of the license application by SAMA.

• 9. Drafts of proposed agreements and contracts with third parties, particularly agreements and contracts with related parties and external service providers; and

• 10. Any other documents or information requested by SAMA.

• Subject to the provisions of the Companies Law, the minimum paid-up capital for a finance company shall be as follows:

  • 1. (200,000,000) two hundred million riyals for a finance company engaged in real estate financing activity.

  • 2. (100,000,000) one hundred million riyals for a finance company engaged in one or more financing activities other than real estate financing.

  • 3. (10,000,000) ten million riyals for a finance company engaged in microfinance activity exclusively without other financing activities.

  • 4. (50,000,000) fifty million riyals for a finance company engaged in financing small and medium enterprises exclusively without other financing activities.

• The Authority may increase or decrease the minimum capital in accordance with market conditions, or if it deems that the proposed business model of the finance company, the nature of its activities, or the proposed geographical scope of the activity necessitates that, taking into account the size and nature of the risks associated with the activity. The capital must be fully paid upon the establishment of the finance company.