1. What is the purpose of issuing finance laws?

Finance laws and their implementing regulations are aimed at regulating the finance sector, maintaining its stability, setting necessary practice controls, protecting consumers, clarifying consumer rights and obligations, identifying potential risks that may encounter consumers, insuring fair and sound transactions, and encouraging fair competition among financiers, taking into consideration transparency and disclosure principles.

2. Are finance companies allowed to engage in a finance activity before being licensed by SAMA?

Article (4) of the Finance Companies Control Law states that "No finance activities, as specified under this Law, may be engaged in without obtaining a license in accordance with the provisions of this Law and other applicable laws." 

3. How do finance laws protect the rights of consumers in regards to finance products?

Protecting the rights of consumers in the finance sector is one of SAMA's priorities. The Implementing Regulation of the Finance Companies Control Law includes a number of provisions related to the protection of the borrower's rights. For example, some of these provisions govern method of calculation and disclosure of finance costs, set a maximum limit for administrative fees, illustrate the mechanism of handling complaints, and address the standards and procedures of early settlement in a manner that ensures fairness between parties of a contract. SAMA also issued the Banking Consumer Protection Principles and the Finance Consumer Protection Principles, which aim to protect the consumer interests and insure that financial entities deal with consumers in a professional and fair manner, provide them with consultation when they want to file complaints and compensate them when needed. Moreover, One of SAMA strategic objectives is to ensure that consumers dealing with financial institutions under its supervision receive transparent, honest and fair treatment and obtain financial services and products easily and smoothly at high quality and fair value.

4. What are the responsibilities of SAMA toward the real estate finance sector?

According to Article (2) of the Real Estate Finance Law and Article (2) of the Implementing Regulation of the Real Estate Finance Law, SAMA shall have the jurisdiction to regulate the real estate finance sector. To this end, SAMA may perform the following:

• Licensing of real estate finance companies to engage in real estate finance activities in accordance with the provisions of the Real Estate Finance Law and the Finance Companies Control Law and their implementing regulations.
• Taking necessary procedures to maintain the soundness and stability of the real estate finance sector and ensure fair transactions.
• Taking necessary procedures to encourage effective and fair competition among real estate financiers.
• Issuing rules and instructions to regulate real estate finance sector.

• Taking necessary methods to improve the real estate finance sector, nationalizing its jobs, and improve the competency of the sector's workforce by regulating the obligations of the real estate financiers toward training human resources, developing their skills and broadening their knowledge.
  

5. Are there standard contracts for real estate finance?

SAMA has approved a standardized form for real estate finance contracts. The form aims to increase transparency, assure fairness among financiers, and assuring rights of consumers and protecting their interests.

6. Does SAMA provide data and information related to real estate finance?

SAMA periodically publishes data on real estate loans in the monthly statistical bulletin and annual statistics.  In addition, SAMA has recently published data of the new residential real estate finance provided for individuals by banks and real estate finance companies. Through this, SAMA seeks to increase transparency and make such data available to stakeholders.

7. What is SAMA's role in supporting real estate finance?

SAMA's role is to supervise and control finance companies including real estate finance companies, and to insure the soundness of their financial positions, protect consumer rights, and set policies to regulate real estate finance. In addition, SAMA is responsible for supervising subsidized finance products provided by real estate financiers, in terms of technical aspects, to insure compliance with credit policies and risk management and safeguarding the soundness of the financial system and fairness of transactions. Moreover, SAMA has taken some measures that would contribute in supporting real estate finance in Saudi Arabia. For example, SAMA increased Loan to Value (LTV) ratio from 70% to 90% for citizens desiring to own their first dwelling. SAMA also issued the Responsible Lending Principles, mandatory instructions for providing real estate finance products for individuals, and standard contracts for real estate finance. Further, SAMA has promoted the publication of residential real estate finance data, aiming to increase transparency and making data available to stakeholders.

8. What is the purpose of establishing a real estate refinance company? What is its role? How is its ownership?

The Saudi Real Estate Refinance Company (SRC) is a joint-stock company owned by the Public Investment Fund (PIF) and licensed by SAMA to practice real estate refinancing business. SRC aims to promote liquidity in the sector and reduce financing cost by buying portfolios and providing credit facilities to real estate financiers. It also issues debt instruments backed by real estate assets. SRC seeks to promote growth and stability of the real estate finance sector in Saudi Arabia.

9. What must the real estate finance contract include?

Article (10) of the Implementing Regulation of the Real Estate Finance Law specifies the minimum elements to be included in the finance contract. Some of which are the term of real estate finance contract, total amount of real estate finance, number of installments, amount of each installment, dates of the first and last installments, etc. In addition, the preamble of a real estate finance contract shall include a summary covering the basic information of the finance product and main provisions in a clear and easy language, in accordance with the form set by SAMA. The borrower's receipt of such summary shall be documented in the finance file. SAMA has approved a standard form for contracts of real estate finance for individuals, in the forms of Murabaha and Ijara. Through this, SAMA aims to increase transparency in contracts, achieve fairness among real estate financiers, and enhance rights of consumers and protect their interests.

10. Is the lessee entitled to early ownership of the leased asset?

According to Article (11) of the Implementing Regulation of the Finance Lease Law, if a lessee chooses, at any time, to own the leased asset under the contract, he/she may be entitled to early ownership of the leased asset by concluding a separate sale or grant annex to the contract, upon early payment of the remaining installments and without incurring the term cost for the remaining period of the contract. The lessor is entitled to compensation for the following: (1) reinvestment cost, not exceeding the term cost for the three months subsequent to early ownership; and (2) expenses stipulated in the contract, made by the lessor to a third party, if such expenses are irrecoverable, for the remaining term of the contract. However, the contract may provide for a restriction period barring early ownership if the subject of contract is a real estate and such condition results in a deduction from the term cost, provided that such restriction period does not exceed two years from the date of contract conclusion.

11. What is meant by contract register? What entity is responsible of registering contracts?

Contract register means a register for finance lease contracts concluded or executed in Saudi Arabia, sales contracts resulting from finance lease, and any amendments to these contracts. The contract registration company is responsible for the registration process. SAMA has granted a license to the Saudi Finance Lease Contract Registration Company (SIJIL) to carry out this task.

12. Are companies licensed to practice finance activities other than real estate finance (such as companies licensed to engage in finance lease) allowed to finance real estate for companies or to finance commercial real estate, such as office buildings and shopping complexes?

It is not required of finance companies practicing finance activities other than real estate finance that offer non-residential real estate finance such as commercial real estate directed towards non-individuals to obtain SAMA's non-objection. Provided, it obtains the license to practice the related finance activity.

13. Can finance companies offer their shares for public subscription (IPO)?

Yes, finance companies may offer their shares for public subscription in accordance with the relevant standards and regulations and after obtaining SAMA's non-objection.

14. Do finance companies need SAMA's approval before launching a new product or amending an existing one?

According to Article (23) of the Implementing Regulation of the Finance Companies Control Law, "The finance company shall obtain a no objection letter from SAMA prior to launching any new financial products or amending any existing products" directed to individuals or microfinance beneficiaries.

15. How to get Finance Laws and Implementing Regulations?

Finance Laws and Implementing Regulations can be found on: ""Laws and Regulations"" page as well as  licensing guidelines and requirements  on ""Licensing Requirements""  and licensing request forms on ""Apply for a License"" page on SAMA's website.

16. How to find the names and addresses of companies licensed by SAMA?

Such information and other related information are available on:

Licensed Entities page on SAMA's website.

17. Who is responsible at SAMA for receiving consumer complaints against finance companies?

Consumers of banks, insurance companies and finance companies can submit their complaints to SAMA through Consumer Protection Department. When using any of the channels to submit your complaint, you will receive a complaint reference number that must be used in all future communications with SAMA.

The following are the channels you can use to submit a complaint to SAMA:

• Contact us on the toll-free number: 800-125-6666. Service hours are from 8:00 am to 4:00 pm (10:00 am to 4:00 pm during Ramadan). From Sunday - Thursday.
• SAMA Cares portal.
• Please visit Customer Service Center at SAMA's Head Office, King Saud Bin Abdulaziz Road, Riyadh. Service hours are from 08:00 am to 03:30 pm. From Sunday – Thursday.
• Write to us at the following address: SAMA, Consumer Protection Department, King Saud Bin Abdulaziz Road, P.O. Box. 2992, Riyadh 11169, Saudi Arabia. 

18. What are finance support activities?

They are the supporting and supplementary activities associated with financing activity as determined by SAMA.

19. What finance support activities are licensed by SAMA?

Currently, SAMA is licensing the following two activities:

• Finance debt collection service.
• Finance aggregator service.

SAMA may approve new activities in the future. 

20. What is meant by finance debt collection service?

It is a service provided to collect the debts from clients on behalf of private finance entities licensed by SAMA as well as public entities that extend credit.

21. What is meant by finance aggregator service?

It is a service provided to connect clients with licensed finance entities according to their credit obligations and solvency to offer them financial services for a charge.

22. What entities are currently licensed to engage in finance support activities?

To view entities licensed to engage in finance support activities, please click (here).

23. Is it permissible for licensed finance companies to apply for a license to practice finance support activities?

The Finance Companies Control Law prohibits the practice of any activity other than finance. These companies may engage in activities that supplement and support their activities according to the provisions of the Finance Companies Control Law and its Implementing Regulations.

24. What are the conditions for submitting a license application to engage in finance support activities?

Articles (5) and (6) of the Rules of Licensing Finance Support Activities set forth the requirements for submitting a license application to practice finance support activities. To view the Rules, please click (here). The Guidelines for Applying for a License to Practice Finance Support Activities can be found at the link (here).

25. Is it permissible for a licensed company engaging in one or more finance support activities to practice another activity?

The Rules of Licensing Finance Support Activities prohibit finance support companies from engaging in any other activity that is unlicensed by SAMA.

26. Is it permissible for a licensed company to engage in two or more finance support activities?

A finance support company may request to amend the license to include another finance support activity, provided that the request is based on reasonable justifications. Any documents, information or studies required by SAMA must be attached to the request.

27. When cases entail the revocation of a finance support license?

SAMA may revoke a company's license in any of the following cases as mentioned in Article (15) of the Rules of Licensing Finance Support Activities:

1. Upon the request of the finance support company, taking into account the rights of creditors and beneficiaries as well as the soundness of the financial system.
2. If the finance support company has submitted false information or failed to disclose material information that should have been provided for licensing purposes.
3. If the finance support company has violated the requirements of the Rules of Licensing Finance Support Activities, the provisions of finance laws, or SAMA's instructions.
4. If the finance support company has not carried out the licensed activities within six months from the date of issuance of the license.
5. If the operations of the finance support company have been suspended for more than three consecutive months, or for six non-consecutive months, without obtaining SAMA's prior written no-objection.

28. How long is the validity period of the license issued by SAMA for a finance support company?

The license will be valid for three years and may be renewed by SAMA upon the request of the company. The company submits a request for renewal in writing at least three months before the expiry date of the license.

29. When does the license for a finance support company expire?

The license expires in any of the following cases:

1. Non-renewal of the expired license.
2. Appointment of a liquidator for the finance support company.
3. Commencement of bankruptcy proceedings under the Bankruptcy Law.

30. Is there a certain percentage of Saudization required in licensed finance support companies?

At least 50% of all employees must be Saudi when a finance support company starts its operations, according to Article (20) of the Rules of Licensing Finance Support Activities.