1. The terms and phrases mentioned in these rules shall have the meanings set out in the Finance Companies Control Law and its Implementing Regulations.
2. For the purpose of applying the provisions of these rules: the following terms and phrases, wherever they appear in these rules, shall have the meanings assigned to each of them unless the context requires otherwise:

The Rules: The Rules of Engaging in Microfinance Activity.

SAMA Instructions: Includes any regulations, rules, instructions, or circulars issued by SAMA.

Microfinance Company: The company that finances the production activates and assets of small business owners, crafts people and the like, and which is licensed to engage such activity under the Finance Companies Control Law, its Implementing Regulations, and the rules and instructions issued by SAMA.

Taking into consideration the Finance Companies Control Law issued by Royal Decree No. M/51 dated 13/08/1433H and its Implementing Regulations issued on 14/04/1434H corresponding to 24/02/2013, these rules define the specific requirements for practicing microfinance activities and apply to finance companies licensed to engage in microfinance activities.

Microfinance Companies shall be subject to the provisions of licensing finance companies stated in the Law and the Implementing Regulation, and commensurate with the nature and the size of the Microfinance Company’s activity and its type of operations.

Notwithstanding Paragraph (2) of Article Twelve of the regulations, a candidate for a senior management position in a microfinance company must be professionally qualified, and must have at least two years of relevant experience in the same field.

SAMA specifies what a microfinance company shall comply with in terms of information technology, corporate governance, internal organization, outsourcing, risk management, compliance and internal audit based on the nature and the size of the Microfinance Company’s activity and the type of operations.

SAMA specifies the provisions that shall be set by Microfinance companies to cover potential losses and risks.

SAMA specifies what a microfinance companies shall comply with regarding the requirements of anti-financial crimes, specifically money laundering, financing terrorism and Counter-Fraud, in a manner that is consistent with the potential risks in these companies.

The Microfinance Company shall establish internal controls and procedures that ensure compliance with these rules and all relevant laws, regulations and instructions, and when contracting with third parties, the Microfinance Company shall ensure the compliance of all third parties with the provisions of these Rules or any related laws and regulations.

The Microfinance Company shall maintain adequate records to prove its compliance with these Rules and all relevant laws, regulations, instructions and take the required measures to prevent any violations of its provisions.

The Board of Directors of the microfinance company forms an audit committee, and it may also form specialized committees to expand the scope of work in the areas requiring special expertise, and shall grant those committees the necessary powers to perform their work and monitor their performance.

The Microfinance Company shall set written policies, rules and procedures for finance in line with its activity nature, and ensure their implementation, including, as minimum, the following:

A Microfinance Company shall establish a code of conduct, approved by the Board of Directors and provide SAMA with a copy of it. This code shall include principles, policies and clear controls for business ethics to deal with the beneficiaries, especially on Credit granting and installment collection practices. The Microfinance Company should take what is needed to ensure the compliance with its code of conduct in line with the relevant Rules, Regulations and Instructions.

Microfinance shall be limited to Financing the production activates of small business owners, crafts people and the like. A Microfinance Company shall not offer consumer finance or exercise finance activities other than Microfinance.

The finance amount provided to each beneficiary of Microfinance shall not exceed one hundred thousand riyals (100,000), SAMA may raise the amount to two hundred thousand riyals (200,000), if it deems necessary.

Taking into account Article (61) of the implementing regulation, A Microfinance Company may grant financing without collateral; or with collateral, taking into account the type and nature of this finance, in accordance with the policies and procedures of risk management approved by the Board of Directors of the Microfinance Company.

Without prejudice to the Finance Companies Law and its Implementing Regulation, a Microfinance Company shall not:

SAMA may take all necessary actions to verify the microfinance company’s compliance with these rules, laws, regulations, and relevant instructions, such as requesting the company’s information and documents or on-site supervision, inspection, meeting their employees and viewing their systems, procedures and records, the company must cooperate with SAMA employees and facilitate their work.

Non-compliance with these Rules is a violation of the Finance Companies Control Law and its Implementing Regulations and exposes the Microfinance Company to regulatory sanctions.

These rules shall enter into force on the date of their publication on SAMA's website.