Chapter Ten Finance Procedures
Article 49
1. Without prejudice to these Rules and the relevant instructions issued by SAMA, a Consumer Microfinance Company shall define written finance policies setting out rules and procedures for granting finance including, but not limited to, classification of creditworthiness.
2. A consumer microfinance company's board shall approve all finance policies and all amendments to policies and provide SAMA with a copy of these policies.
Article 50
The Consumer Microfinance Company shall not engage in any activity other than the activity of consumer microfinance. It shall practice such activity according to the following:
a. The finance shall be for purchasing goods and services for purposes of consumption, including, but not limited to, purchase of furniture, consumer goods and household products or payment of education fees and the like.
b. The finance to the borrower shall not be for commercial or professional purposes.
c. Vehicle purchase financing is excluded from consumer microfinance activity.
Article 51
A Consumer Microfinance Company shall obtain a non-objection letter from SAMA before launching any finance products or modifying any existing products.
Article 52
A Consumer Microfinance Company shall fully abide by the Responsible Lending Principles for Individual Consumers issued by SAMA.
Article 53
1. Consumer Microfinance Company must, upon the approval of the Consumer, verify the consumer’s credit record to confirm solvency, repayment capacity and credit conduct. The confirmation of such must be documented in the finance file.
2. Upon the borrower’s consent, the Consumer Microfinance Company shall register the credit information of the borrower at one or more of the companies licensed to collect credit information according to the relevant laws, regulations and instructions. Such information shall be updated throughout the period of dealing with the borrower.
3. The Consumer Microfinance Company must decline the finance request in case of the absence of consent from the consumer or borrower mentioned in paragraphs (1) and (2) of this Article.
Article 54
A Consumer Microfinance Company shall not:
a. provide finance to a foreign borrower not residing in Saudi Arabia; or
b. provide finance in a currency other than the Saudi riyal.
Article 55
1. A Consumer Microfinance Company shall adopt clear, transparent and documented scientific methods, criteria and procedures to evaluate the creditworthiness of the finance applicant and his/her ability to repay. These methods, criteria, and procedures shall be in accordance with the best practices in this area. The board of directors of the company shall adopt, revise at least once every three years, and update when necessary these criteria and procedures. The company shall apply these procedures and document them in the finance file prior to granting finance.
2. A Consumer Microfinance Company shall set procedures for early risk detection in order to identify the finance with clear evidence of increased risk. It shall also develop quantitative and qualitative indicators for early risk detection.
Article 56
A Consumer Microfinance Company may provide unsecured finance in line with the risk management policy and procedures approved by its board of directors.
Article 57
1. The total amount of finance granted to a borrower by a Consumer Microfinance Company must not exceed (SAR 50,000) fifty thousand riyals.
2. Notwithstanding the provision of subsection (1) of this article, the total amount of finance granted to a borrower by a Consumer Microfinance Company that carries out its activity using financial technology must not exceed (SAR 25,000) twenty-five thousand riyals.
3. SAMA may adjust this amount according to the market conditions or geographical scope of the company.
Article 58
A Consumer Microfinance Company must make provisions for contingent losses and risks in accordance with International Financial Reporting Standards. SAMA may require that the company to make an additional provision or more for contingent losses and risks.
Article 59
The Consumer Microfinance Company must define cases in which an exposure requires special observation; these exposures shall be reviewed on an ongoing basis to determine whether further actions may be required. There must be clear rules determining when a finance must be transferred to personnel specializing in restructuring, scheduling or winding up.
Article 60
Insurance on finance risks shall be in accordance with the Cooperative Insurance Companies Control Law and its Implementing Regulations as well as instructions issued by SAMA.