​​Financial planning isn't only practice; it is more of culture. Yet, most of the consumers in the Arab markets lack that kid of planning. In May 2018, the Saudi Central Bank (SAMA) issued new mandatory instructions to both banks and financing companies inside the kingdom related to residential mortgages. These instructions came based on the powers granted by the relevant regulations and laws. These instructions seek to protect all parties' rights and enable consumers to make the right decision regarding their finance. This should boost financing measures and validity of real residential mortgage industry.

SAMA stressed that unless banks and financing companies meet these instructions, they will not be able to conclude any contracts to individuals. Based on the new instructions, SAMA directed financing banks and companies to thoroughly study all requests by customers to fully understand their situation and gain a better visibility into their financial status; making sure that the product should fit the customer. The financer must not provide the finance to the customers unless they demonstrate the capability to pay-off his/her obligation according to financer's policies which had to be as well approved by SAMA regulations.

Moreover, SAMA stressed that financers should provide full clear explanation of the proposed loan in which they illustrate most important terms and conditions of the contract. Clarification and documentation of relevant risks and inquiries must be provided by a special advisor in a very clear, simple and understandable language to the customer. Financer is not expected to provide the mortgage offer, unless the customer fully recognizes all terms and obligation related to the contract. Based on the new instructions, financers are obligated by SAMA to provide an offer which is valid for no less than 15 days. The offer should include a clear printed copy of the contract including all data and documents to be signed. The offer must contain a number of documents including the mortgage contract and its annexes, disclosure format, credit risk acceptance format of variable interest mortgage.

SAMA stressed also on the necessity of documenting customer's recipient of these documents. Customer should be allowed to take these documents outside to consider others' opinions if he/she likes so. Otherwise financer is not allowed to conclude the contract with the customer. Moreover, banks and finance companies are demanded by SAMA to provide a qualified credit advisor who is eligible to clarify and give clear explanation of the proposed loan and its relevant risks and conditions or any possible re-pricing. SAMA asserts that the qualified credit advisor should not be the same agent who had contacted the customer initially to propose the suggested loan product bearing in mind that this communication should be documented either by audio recording or signing a particular format for that purpose.

SAMA emphasized on the five days period starting from customer's recipient of the contract to give customers the opportunity to review and discuss the offer with the credit advisor and whomever he/she wants. SAMA requested all financers to urge the customers not to take any action during the five days period (e.g., advance payment, deposit) emphasizing that no contract allowed to be concluded before the waiting period elapsed. SAMA urged banks and other financer companies to immediately take all necessary steps to ensure full compliance with above instructions starting from 01/12/1439H corresponding to 2018/08/12 indicating that legal actions will be taken against any violation.

According to the Implementing Regulation of the Finance Companies Control Law, no person may engage in any finance activity without obtaining a licence from SAMA in accordance with the Law and Regulation or other applicable laws. SAMA may exempt certain transactions and activities from certain provisions of this Regulation when it deems that their nature or volume warrant such exemption. The finance company shall comply with capital adequacy and liquidity levels required in accordance with rules, requirements and standards stipulated by SAMA. The finance company's technical facilities and systems must be sufficient for the company's operational needs, nature of its activities and risk exposure in accordance with established technical standards. Information technology systems and related processes shall be developed to ensure data availability, integration, integrity, and confidentiality. Such systems shall be periodically assessed by the finance company in accordance with established standards and shall be tested prior to launching and after introducing any modification thereto. The finance company shall set up a business continuity plan for emergency cases that ensures alternative solutions to re-operate in a reasonable time.

The finance company shall set a clear written business strategy and a written risk management policy approved and updated annually by the board of directors. The risk management policy shall address all types of relevant risks, taking into account all business activities, including outsourced operations and tasks. The policy shall include analysis of the following risks at a minimum:

• Credit risks.
• Market risks.
• Term cost risks.
• Asset-liability mismatch risks.
• Exchange rate risks.
• Liquidity risks.
• Operational risks.
• Country risks.
• Legal risks. 
• Reputation risks.
• Technology risks.

The finance company shall also et appropriate procedures for the identification, assessment, management and monitoring of risks, and prepare reports thereon, within a comprehensive risk management plan which includes the following:

• Early and comprehensive identification of risks.
• Assessment of correlations between risks.
• Immediate coordination with the board of directors, senior management, risk and credit management committee and executives, and when necessary, the internal audit department.

Moreover, the finance company shall create a risk management position reporting directly to the risk and credit management committee which shall submit to the board of directors its recommendations regarding risk management reports. The finance company shall draw written finance policies setting out rules and procedures for finance, including but not limited to; classification of credit worthiness; procedures for dealing with declining credit rating and non-performing loans; acceptable collaterals and basis for assessing their values; monitoring, administration and enforcement of collaterals as well as risk provisions. The finance company must follow a sound method and a written, transparent and clear standards and procedures to assess credit worthiness of the applicant and his ability to repay, according to best practices in this field. The Board of Directors must approve these standards and procedures and review them at least once every two years, and update the same if necessary. The finance company must apply these procedures before extending finance and document the same in the finance file.

The Saudi Credit Bureau (SIMAH), the leading credit bureaus in the MENA region, offers both negative and positive credit information. SIMAH's credit report is a comprehensive report containing detailed and up-to-date information about credit transactions between a consumer and credit providers, where it includes credit products as loans or telecom services & any information related to them such as next due date, installment amount & payment status.

• Providing clients with accurate and up-to –date credit information. 
• Improving risk assessment.
• Promoting competition and efficiency.
• Effects on the credit market and lending practices.
  
• Responsible lending.
• Saving time, efforts and costs. 
• Providing indices that ease calculating risks. 
  

• Total number of registered individuals: 20,006,487
• 137,168,844 Million reports issued
• No. of Disputes resolved in 2022: 148,101
  

(Saudi Credit Bureau) SIMAH is the leading credit bureau in the MENA region, serving individual consumers, small businesses and large corporations with a full range of credit and financial and risk management products and services.

Established in 2002, and operating since 2004 SIMAH has issued more than 137,876,356​ million credit reports since 2004 with data quality score of 99.4%. Serving over 21,168,192​ Million customers and having over 87,689,301 Million CI's, SIMAH is the largest credit bureau in the MENA region offering industry-leading product and services like SIMAT (Business Solutions), SIMATI (Consumer Solutions) and Value-Added Services (VAS) to cater to business and consumers alike.

SIMAH offers integrated solutions in the domain of analytics and decisioning with its subsidiary QARAR making it the first bureau linked analytics company in the region. MOARIF (The Legal Identifier), SNTR (SIMAH National Trade Repository) and TASNIF (SIMAH Rating) are also managed and operated by SIMAH ensuring vertical and horizonal integration of services.

SIMAH head office is based in Riyadh and can be reached on www.simah.com