How Kafalah works
The Kafalah programme sits under the SME Bank, part of the National Development Fund. It does not lend directly. It gives banks and finance companies a guarantee against part of the risk on Sharia-compliant facilities they grant to small and medium enterprises, which makes them more willing to lend.
The enterprise applies to a participating bank or finance company directly, or through the finance portal supervised by the SME Bank. The lender studies the application first. If it wants a guarantee to cover the risk, it forwards the case to Kafalah.
That order matters. The study has to persuade the bank's credit team before Kafalah sees anything.
What the bank will ask for
Each lender sets its own checklist, but they look alike. One participating bank's published list, for example, asks for:
- The company's foundation contract, where the enterprise is a company
- A feasibility study for a new project, or a business plan
- Three years of audited or in-house financial statements for an existing business
Expect the bank to check your credit record as well. The feasibility study is where a new project makes its case, because there is no trading history to lean on.
Who counts as an SME
Kafalah is for micro, small and medium enterprises as defined by Monsha'at. Where the two tests point to different sizes, the larger one applies.
| Size | Full-time employees | Annual revenue |
|---|---|---|
| Micro | 1 to 5 | Up to SAR 3 million |
| Small | 6 to 49 | SAR 3 million to 40 million |
| Medium | 50 to 249 | SAR 40 million to 200 million |
What we put in a Kafalah study
- A short, plain description of the project, the owners and what the facility will pay for
- Evidence of demand in your actual catchment or customer base, not national averages
- Set-up and operating costs backed by supplier quotations
- Monthly cash flow for the first year, then annual, with the bank's repayment schedule built in
- Debt service cover and a downside case that shows what happens if sales come in slower
- The owners' contribution and where it comes from
Bank credit officers read a lot of these. A study that answers their questions in the order they ask them, with a model they can open and test, gets through faster.
Questions we're asked
Does Kafalah lend money?
No. Kafalah guarantees part of the financing that participating banks and finance companies grant to SMEs. The loan itself comes from the bank.
Is a feasibility study always required?
For a new project, participating banks generally ask for one. For an existing business, a business plan and past financial statements may be enough. Ask your bank, or ask us and we'll check what your lender's list says.
Can you help with an existing business that wants to expand?
Yes. For an expansion we build the study around your historical accounts, so the projections start from real trading figures.
Which banks take part?
Many Saudi banks and licensed finance companies work with the programme. The SME Bank's finance portal lists current options.