Financial Transformation of the Finance Function in KSA

Imad Adileh
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Financial transformation is an important step in the economic development and maturation of any country that wishes to compete in the global market. As it stands, Saudi Arabia's financial sector is still in the process of developing its full potential. With recent government initiatives and the implementation of more robust economic policies, the Kingdom is taking steps to improve its financial stability and modernize its finance function. In this article, we will explore why financial transformation is necessary for KSA, how businesses can prepare for it, and the potential benefits that this transformation can bring.

What is Financial Transformation?

Financial transformation refers to the process of improving and modernizing a country's financial system. This could include introducing new regulations, strengthening oversight, and implementing innovative financial technology solutions. Typically, there are several stages to financial transformation, including:

  • Regulatory review. This is the process of closely examining the existing financial regulatory framework to identify any inconsistencies, gaps, or loopholes.
  • Technology integration. This involves the integration of new financial technologies into the existing system, such as blockchain, artificial intelligence, and machine learning.
  • Financial inclusion. This refers to the process of extending access to financial services, such as banking and credit, to underserved populations.
  • Digital transformation. This involves the use of digital tools to streamline existing processes and create efficiencies.

In Saudi Arabia, the government has begun to implement several initiatives to achieve this transformation. This includes reforms to the banking sector, improvements to capital markets, and initiatives to increase access to finance for SMEs.

Why is Financial Transformation so Important for KSA?

Saudi Arabia's economy has grown rapidly over the past 50 years, but much of the growth is dependent on oil. As the world looks to move away from its dependence on fossil fuels, it is increasingly important for the Kingdom to diversify its economy. Financial transformation can help provide the infrastructure and tools needed to support this transition.

Financial transformation will enable KSA to better compete in the global market, attract more foreign investments, and encourage innovation. It will also help to develop the capital market, improve access to finance for SMEs, increase financial literacy, and encourage entrepreneurship.

As part of Vision 2030, the Saudi government launched the Financial Sector Development Program. In 2017, the Financial Sector Development Program was launched to empower financial institutions and help spur private sector growth. Through this program, an advanced capital market is being developed, which will enable better financial planning for businesses of all sizes.

The program oversaw the launch of the Saudi Stock Exchange “Tadawul”, which was a massive success and instrumental in ensuring the triumph of Saudi Aramco's initial public offering (IPO) in 2019. Additionally, thanks to the launch of the Program, financial technology for startups had a marked increase in support. The initiative has also progressed the government's vision of a cashless society and increased the usage of digital payments.

How Can Businesses Prepare for Financial Transformation in KSA?

The first step is to assess the existing financial infrastructure, processes and technologies, and then develop an action plan that’s in line with the government's vision. Businesses should also work closely with advisors and experts to ensure that they are compliant with existing regulations. This might include developing a risk management framework, improving internal processes and controls, or introducing new technology.

Technology, in particular, is an integral part of financial transformation, and businesses should look to explore how they can integrate new technologies into their existing systems. Online payment solutions, mobile banking apps, and digital wallets can all help businesses to streamline their processes and improve customer experience. But it's important to also consider the needs of customers and ensure that they are comfortable with any new technologies being implemented.

Businesses may also take advantage of the financial sector development program by looking for opportunities to apply for grants or exploring the possibility of partnering with market-leading financial technology firms. Ultimately, the financial transformation of KSA is an opportunity for businesses to embrace change, innovate, and improve their long-term sustainability.