Corporate Lending Fuels Surge in Saudi Credit Market as Banks Embrace Economic Diversification

Saudi Arabia’s banking sector recorded a sharp rise in total credit in March 2025, reaching SR3.1 trillion ($827.2 billion), according to data released by the Saudi Central Bank (SAMA). The 16.26 percent year-on-year increase marks the highest annual growth in three years and eight months.

The spike was largely driven by increased corporate lending, which rose by 22.3 percent year-on-year to SR1.71 trillion. Businesses now account for 55.19 percent of total credit issued by banks, up from 52.46 percent a year earlier. The shift reflects a growing emphasis on commercial and industrial sectors as Saudi Arabia pushes forward with its Vision 2030 economic diversification agenda.

Real estate led the corporate lending portfolio, growing 40.5 percent year-on-year to SR374.5 billion and comprising 22 percent of total business loans. This growth is fueled by a wave of residential and commercial developments linked to national giga-projects such as NEOM and Qiddiya.

Other key recipients of corporate credit included wholesale and retail trade (SR212.8 billion), manufacturing (SR189.18 billion), and utilities including electricity, gas, and water supply (SR181.43 billion). Lending to the education sector, while modest at SR9.35 billion, grew at the fastest rate — 44.7 percent — reflecting expanded investment in academic infrastructure.

The financial and insurance sectors also posted strong gains, with credit rising 38.41 percent to SR161.23 billion, signaling broader adoption of fintech and increased financial service penetration across the economy.

In contrast, retail lending, which includes personal and housing loans, grew 9.6 percent to SR1.39 trillion. However, its share of total credit fell from 47.54 percent last year to 44.81 percent, suggesting a strategic realignment of banking priorities toward corporate and productive sectors.

A new report by McKinsey & Company highlighted that the overall quality of lending has improved, particularly in finance, services, and utilities. Banks are increasingly focusing on sectors with lower credit risk and higher loan volumes. The report also noted that the banking sector is moving away from the traditional “originate-to-hold” lending model to a more flexible “originate-to-distribute” approach, allowing banks to securitize and trade loans, thereby freeing capital for new lending.

In a key development, Saudi Arabia introduced its first residential mortgage-backed securities in 2025, marking a step forward in the creation of a deeper, more liquid capital market.

Banks are also embedding environmental, social, and governance (ESG) standards into lending frameworks, issuing green and sustainability-linked loans. Alongside this, digital transformation is accelerating, with AI, automation, and advanced analytics being deployed to improve productivity and risk management.

With demand for credit expected to grow 12 to 14 percent annually through 2030, the Kingdom’s financial institutions are preparing to support this expansion by investing in innovation and improving operational efficiency.