Changing with the Times

You are set to debut in the bond market with a plan to raise SAR8.5 billion in 2019. Could you tell us more about this new avenue of funding?

In 4Q2018, we launched our sukuk program and started to issue. At this point in time, we target the domestic market, and although the volume is rather significant, we view it as a stepping stone toward a larger presence in the capital markets and our engagement with investors. We plan to have further issuances this year, probably toward the end of the year, and we may go international after that. The sukuk issuances are part of our funding diversification agenda, for which we have other initiatives in the pipeline. This is in parallel to the increase of our balance sheet linked to the funding and liquidity we supply to the market. Thus far, we have deployed SAR1.2 billion (USD319.968 million) in funding. We recently signed the guarantee agreement with the Ministry of Finance, which was part of the original process that established SRC. This is a milestone in our refinancing program and our pursuit of optimized costs of lending for the borrower. We also work on strengthening the links with the rest of the housing ecosystem, for example with the Real Estate Development Fund (REDF) and the National Housing Company (NHC). Now that the foundations have been laid, we can fine-tune our individual proposals, and value proposition and reinforce the exchange amongst entities in the ecosystem. Further strengthening our partnerships will ultimately place us even more competitively in the global housing financing market. Already, there is a much stronger dynamic and trust at work, vindicating the initiatives that have been pushed across the board. There is traction, and the idea is to cultivate, nurture, and keep pushing this to long term.

How do you include the changing demographics into your mid- to long-term strategy?

First, the demographic is indeed changing, which includes a generation with a different mindset and approach to financing a house. At the ministry’s level, there is a great focus on digitalization and the use of all social media to reach out to this young generation to inform them about access to home loans. At the company level, we have launched an awareness campaign about mortgages. Factoring in the demographics is an important element because of our long-term view. Second, the new generation has different ambitions and aspirations with a greater focus on careers as entrepreneur. For us, that means there must be logic and consistency in what we will offer them. Our vision is to ensure that entrepreneurs and employees in the private sector have access to an affordable mortgage.

What will the diversification of funding look like in the coming years?

We have a clear vision of what our ultimate goal is and what we want to reach; we have to bring liquidity to the market and contribute to shining the spotlight on the Kingdom’s mortgage market for investors internationally. SRC is a bridge between the need for liquidity in the Kingdom for mortgages and the capital market. If liquidity does not come to the market, there will be a chain reaction, and we will end up with less or no mortgages or mortgages that are detrimental to borrowers. The goal eventually is to provide the right product to borrowers with the right incentive whilst matching the expectations of investors. This requires a third chapter: raising the bar, increasing transparency, and addressing the questions of investors. We will tap into the international market beyond the GCC countries. We will look into different currencies, shapes, and forms and develop different products profile. Today, we will focus on corporate bonds destined for the domestic market.