The Saudi Central Bank issued these principles based on the powers granted to it under the relevant laws, regulations, and instructions.

These principles should be read in conjunction with the following:

• A. The Banking Control Law issued by Royal Decree No. M/5 dated 22/2/1386 AH.

• B. The Financing Companies Control Law issued by Royal Decree No. M/51 dated 13/8/1433 AH and its executive regulations issued by the Governor's Decision No. 2/M Sh T dated 14/4/1434 AH.

• C. The Real Estate Financing Law issued by Royal Decree No. M/50 dated 13/8/1433 AH and its executive regulations issued by the Minister of Finance's Decision No. 1229 dated 10/4/1434 AH.

• D. The Leasing Financing Law issued by Royal Decree No. M/48 dated 13/8/1433 AH and its executive regulations issued by the Governor's Decision No. 1/M Sh T dated 14/4/1434 AH.

• E. The updated Consumer Financing Controls issued under Circular No. 3510000116619 dated 10/09/1435 AH.

• F. The Controls for Issuing and Operating Credit Cards and Direct Debit Cards issued under Circular No. 361000090389 dated 26/06/1436 AH.

• G. The Controls and Procedures for Collecting from Individual Customers issued by the Central Bank Circular No. 391000083340 dated 26/07/1439 AH corresponding to 12/04/2018 AD.

• H. Principles for Protecting Bank Customers issued under Circular No. 341000095960 dated 3/8/1434 AH.

• I. Principles for Protecting Financing Company Customers issued under Circular No. 361000110320 dated 14/8/1436 AH.

1. The terms and phrases mentioned below - wherever they appear in these principles - shall have the meanings specified next to each, unless the context requires otherwise:

• Bank: Saudi Central Bank.

• Governor: Governor of the Saudi Central Bank.

• Financier: Banks and financing companies subject to the supervision of the bank and licensed to engage in one or more financing activities.

• Principles: Principles of responsible financing for individuals.

• Client: The natural person who receives financing or who applies to the financier requesting financing or to whom financing is directed.

• Amount of Financing: The maximum limit or total amounts available to the client under the financing contract.

• Cost of the Deadline: The value of the deadline imposed on the client under the financing contract, which can be expressed as a fixed or variable annual percentage of the amount of financing provided to the client.

• Variable Cost of the Deadline: The cost of the deadline determined based on a clearly defined reference index or rate, specified in the financing contract and changes with the change of the index.

• Total Amount Due from the Client: The amount of financing plus all costs the client is obligated to pay under the provisions of the financing contract, including the cost of the deadline, fees, commissions, administrative service costs, insurance, and any necessary expenses to obtain financing, excluding any expenses that the client can avoid such as costs and fees due from the client as a result of breaching any of their obligations stated in the financing contract.

• Monthly Credit Obligations: The total amounts due from the client according to the credit report issued by licensed credit information companies and the client's personal disclosure, calculated on a monthly basis.

• Total Salary: The monthly basic salary (after deducting retirement or insurance dues) plus all fixed allowances provided to the employee by their employer on a monthly basis.

• Total Monthly Income: The monthly average of the financial amounts received by the client from any source of periodic income, whether monthly, annually, or of another periodic nature, including total salary or any other income, including any allowances or bonuses paid periodically, rental returns from assets, or any returns from other investments, or otherwise, which can be reasonably verified, calculated according to the provisions of paragraph (14) of these principles.

• Net Available Monthly Income: The amount remaining from the client's total monthly income for spending, investing, or saving after deducting current or expected future essential expenses and monthly credit obligations, calculated on a monthly basis.

• Debt Ratios: The ratios of the client's monthly credit obligations to the client's total monthly income, calculated according to the terms and conditions stated in Chapter Four regarding the quantitative principles of responsible financing.

• Deductions: The deduction from the client's total salary or from their monthly pensions.

8. The financier must follow a scientific approach and clear, transparent, and written standards and procedures to assess the creditworthiness of the client and their ability to repay, in accordance with best practices in this field and in a manner that does not conflict with these principles. The Board of Directors of the financier must approve these standards and procedures, review them annually, and update them as necessary. The financier must apply these procedures before granting financing and document this in the financing file.

9. The financier must examine the client's credit record, after obtaining their consent, to verify their financial adequacy and ability to bear monthly credit obligations and their credit behavior, and document this in the financing file. The financier must request the client to declare in writing any other credit obligations they have, such as loans from employers, friends, relatives, or other obligations, whether current or anticipated, and document this in the financing file. The financier - in accordance with the provisions of the relevant regulations, rules, and instructions - after granting financing, must register the credit information related to the financing granted to the client, after their consent, with licensed credit information companies, and update that information throughout the duration of dealings with the client. The financier must reject the financing request if they do not obtain the client's consent to all that is stated in this paragraph.

10. The financier must subject all clients to an assessment of their ability to bear monthly credit obligations, especially in circumstances where the client's burden ratios approach the upper limits stated in these principles. The assessment of the ability to bear monthly credit obligations is primarily based on evaluating the client's available net monthly income that can be used to meet their monthly credit obligations, taking into account the variation in essential expenses based on multiple factors such as income levels, number of dependents, place of residence, and whether the client owns their home or rents it, or otherwise. The financier is expected to establish appropriate rules according to best practices to apply comprehensive factors to different client categories. Financing is considered bearable if the total monthly credit obligations of the client after granting financing are less than the client's available net monthly income and in a manner that does not conflict with the burden ratios stated in Chapter Four regarding the quantitative principles of responsible financing, paragraphs (15, 16, 17) of these principles.

11. The financier must use financial models and tools to measure the ability to bear monthly credit obligations and the suitability of financing for the client's needs and circumstances, based on a credit study and an assessment of the client's available net monthly income. This type of model is based on fundamentals, the most prominent of which is the enumeration and classification of the usual essential expenses for different client categories, and the essential expenses include at a minimum the following groups:

• أ) Food expenses, which are affected by the number of dependents.

• ب) Housing (rent) and utility expenses, which depend on whether the client owns their home, rents it, or otherwise.

• ج) Domestic labor wages.

• د) Education expenses, which are affected by the number of dependents.

• هـ) Healthcare expenses, which are affected by the number of dependents.
  و) Transportation and communication expenses.

• ز) Insurance expenses for the individual personally and for their dependents, as applicable.

• ح) Any expected future costs or expenses.

• In addition to the above, the existing monthly credit obligations that can be verified through licensed credit information companies and financing from employers, friends, relatives, or other financing that is repaid through monthly, semi-annual, or other installments are included.

12. The financier must ensure a balance between efficiency and effectiveness in the financial models and tools used to measure the ability to bear, benefiting from the information and data available to the financier as well as from legally available public statistics sources. The methodology of these models and tools should include at a minimum the following:

• أ) A mechanism for calculating and analyzing total monthly income.

• ب) A mechanism for calculating and analyzing monthly credit obligations.

• ج) A mechanism for calculating and analyzing essential expenses, including the following:

  • ● A list of essential expense indicators compared to verified data.

  • ● The possibility of changing essential expenses according to income levels.

  • ● The possibility of changing essential expenses according to the number of dependents.

13. The conditions for calculating the monthly credit obligations of the client must be adhered to as follows:

• أ) The monthly credit obligation for the credit card shall be equal to the minimum payment of the credit limit for each credit card issued to the client.

• ب) The monthly credit obligations include all obligations towards lenders, specialized government lending institutions, and any other credit obligations such as loans from employers, friends, relatives, or other financing.

• ج) The lender must consider, before granting financing with a variable cost deadline, adding a hypothetical margin to the cost deadline when granting financing while calculating the monthly credit obligations for this financing, and the monthly credit obligations for this financing must be documented based on the cost deadline at the time of granting the financing plus the hypothetical margin in the client's credit report at the credit information company, in order to address the risks of changes in the cost deadline.

• د) After granting the financing, the lender shall be responsible for exceeding the percentage of the client's credit obligations beyond the permissible limit under these principles if such excess is due to a change in the cost deadline, and if this occurs, the lender must reschedule the repayment periods for the financing, and the lender may not then calculate a cost deadline that leads to exceeding these limits.

• هـ) The monthly credit obligations for financing where all installments are not equal shall be calculated assuming the monthly installment remains at the average monthly level of all installments, regardless of whether the financing is due to be repaid through equal payments or requires a final payment.

14. The conditions for calculating the total monthly income of the client must be adhered to as follows:

• أ) The total salary documented by any means from the employer shall be calculated.

• ب) Half of the average monthly total amounts received by the person from any periodic income source, whether monthly, annually, or with another periodic duration, including allowances or bonuses paid periodically, or rental returns from assets or investment returns, or company dividends or others, which can be verified based on the client's account statement for at least two years or through official documents proving their continuity.

• ج) The amounts received by the client from government subsidies such as the Citizen Account Program or social security shall not be included in the total monthly income of the client; however, government support - documented contractually with the citizen and provided by the Ministry of Housing or the Real Estate Development Fund - may be included in the total monthly income of the client for real estate financing products.

15. The burden ratios for clients whose total monthly income is (15,000) Riyals or less are subject to the following restrictions:

• أ) The monthly credit obligations arising from financing, which are only related to the monthly deduction from the client's total salary, shall not exceed (33.33%) for clients and (25%) for retired clients from the total salary.

• ب) The monthly credit obligations, excluding the monthly credit obligations arising from real estate financing, shall not exceed (45%) of the client's total monthly income.

• ج) The monthly credit obligations arising from financing shall not exceed (55%) of the client's total monthly income; however, for clients benefiting from the Ministry of Housing or the Real Estate Development Fund for real estate financing products, the monthly credit obligations arising from financing shall not exceed (65%) of the client's total income.

16. The burden ratios for clients whose total monthly income exceeds (15,000) and is less than (25,000) Riyals are subject to the following restrictions:

• أ) The monthly credit obligations arising from financing, which are only related to the monthly deduction from the client's total salary, shall not exceed (33.33%) for clients and (25%) for retired clients from the total salary.

• ب) The monthly credit obligations, excluding the monthly credit obligations arising from real estate financing, shall not exceed (45%) of the client's total monthly income.

• ج) The monthly credit obligations arising from financing shall not exceed (65%) of the client's total monthly income.

17. The burden ratios for clients whose total monthly income is (25,000) Riyals or more are subject to the following restrictions:

• أ) The monthly credit obligations arising from financing, which are only related to the monthly deduction from the client's total salary, shall not exceed (33.33%) for clients and (25%) for retired clients from the total salary.

• ب) The credit obligations arising from financing shall be subject to the lender's credit policies, and the lender must ensure that all clients are evaluated for their ability to bear the monthly credit obligations stated in these principles.

18. The duration of financing must not exceed (5) years or (60) months from the date of granting the financing, except for real estate financing and credit cards.

19. The bank may periodically review the ratios mentioned in paragraphs (15-16-17) of these principles and amend them, taking into account the stability and soundness of the financial system and economic growth forecasts.

20. These principles are issued by a decision of the Governor of the Saudi Central Bank and published on the bank's official website.

21. The provisions of paragraphs 15-17 of the Responsible Financing Principles for Individuals shall take effect from the date of the circular of these principles.

22. All provisions of these principles shall take effect from the date 01/12/1439 AH corresponding to 12/08/2018 AD, and full compliance with all these principles is required from that date.

23. These principles annul any provisions that conflict with them.