The responsible lending is a regulation established by Saudi Arabian Monetary Authority (SAMA) that aims to promote responsible financing in meeting the actual needs of customers, especially those related to the acquisition of housing and assets rather than consumption purposes. Also, it aims to enhance financial inclusion by providing adequate financing to all segments of society and taking into account the debt burden ratio within a range that the customer can afford. Additionally, the new regulation aims to ensure fairness and competitiveness among creditors, in order to maintain effectiveness of their procedures, mechanisms and efficiency.
Principles of Responsible Lending:
- The customer must disclose in writing any other credit obligations* such as loans from the employer, friends, relatives or other obligations, whether current or anticipated, and must document his credit obligations in the financing file. In addition, the customer needs to update such information throughout the period of dealing with the bank.
- The customer should enclose and classify his regular main expenses that at least include the following set of groups:
- Food expenditures
- Housing rent and services expenses.
- Wages of household labor
- Education expenses
- Health care expenses
- Utilities and Fuel Expenses
- Insurance expenses
- Any expected future costs / expenses / obligations
* The monthly credit obligations shall include all credit obligations by creditors, specialized government lending institutions and any other credit obligations such as loans from employers, friends, relatives or other financing.
* Rates of tolerance is the ratio of the monthly credit obligations to the customer's gross monthly income
SAMA's Announcement and Principles of Responsible Lending