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SA24_FI_FSDP_PIC_ Faisal Alsharif

SAUDI ARABIA - Finance

Faisal M Alsharif

Director General, Financial Sector Development Program

Bio

Faisal M Alsharif is a senior executive in the public sector, currently leading government initiatives aimed at enhancing and uplifting the Kingdom’s financial sector, serving as the acting CEO of the Non-Oil Revenue Development Center and the Director General of the Financial Sector Development Program, a Vision 2030 program. He is also a member of several boards and committees. He previously held the position of Head of Derivatives/Flow Solutions SaudiArabia/MENA–Financing & Solutions Group at Deutsche Bank. Prior to that, he gained valuable experience at Saudi British Bank (SABB) holding different positions within the treasury department with his last role as the manager of treasury wealth solutions. He holds a bachelor’s of science in financial management from Long Beach State University.

"Our financial sector has always enjoyed a very good ranking when it comes to digitalization and technology advancement."

Faisal M Alsharif, Director General of the Financial Sector Development Program, talks to TBY about the role it is playing in developing and digitalizing the financial sector in Saudi Arabia.

As the Director General of the Financial Sector Development Program (FSDP), could you provide an overview of the program’s objectives and its significance for the country’s financial sector?

The Kingdom has embarked on an audacious transformational journey, known as Saudi Vision 2030, that aims to harness our potential to achieve our aspirations and ambitions on various fronts such as growing and diversifying the economy. At the heart of the transformational journey lies the FSDP as a significant enabler to support the development of the economy. The creation of the program aims at ensuring we have proper and robust governance to manage all initiative and projects in an effective way and also bring all stakeholders in the right form to ensure we extend all required support to deliver on the aspirational objectives of the program. To ensure the alignment and readiness of the financial sector with the aspirations of our country’s vision, FSDP has set numerous objectives matched with ambitious commitments. We can summarize our objectives as: Enabling financial institutions to support private sector growth; Ensuring the formation of an advanced capital market; and fintech strategy. Our plan includes a clear roadmap that aims to achieve these objectives including our targets and initiatives, all of which provide clarity to where the KSA financial sector is headed and at what pace, providing market participants and beneficiaries clarity on the positive developments within the sector. From the myriad objectives set by FSDP, let me select a few examples. Increasing banking sector assets, increasing the number of fintech players, increasing funding to SMEs, increasing the number of listings on the Saudi Stock Exchange, developing workforce skills in the financial sector, increasing the value of investment, and many more, all of which have, and will continue to increase the effectiveness and efficiency of KSA’s financial sector on all fronts and for all participants/beneficiaries.

The FSDP aims to enhance the competitiveness and efficiency of Saudi Arabia’s financial sector. What specific measures or reforms have been implemented to achieve these goals?

The financial sector houses multiple sub-sectors and segments such as banking, insurance, capital markets, financial institute, and infrastructure providers, with FSDP’s plan as mentioned earlier covering the full suite of segments/sectors. As such, the reforms and measures that were put in place since the inauguration of the program are plentiful. Picking out a few, the announcement of regulatory enhancements across various laws such as banking, lending, listing, and fund management aim to clarify and/or support the development of the sector. Some of the reforms include allowing foreign investors to invest in the stock market, opening the Saudi market to outside investors. We have also worked with the Saudi Central Bank (SAMA) to issue licensing guidelines for digital banks that resulted in the licensing of three digital banks. As a result of the reforms and measure that were put in place by FSDP, KSA has advanced in the Global Competitiveness Index associated to the financial market, according to the international Competitiveness Yearbook issued by the International Institute for Management Development (IMD) for 2022.

Saudi Arabia has made significant progress in developing its non-banking financial sector, such as insurance and capital markets. How is the program facilitating the growth and diversification of this sector, and what opportunities does it present for investors?

Let me kick off with our efforts in growing and developing the insurance sector, starting off with the major regulatory overhaul that was conducted by reviewing all insurance laws and regulations and amending them with the aim of enabling the growth of the sector. In addition, we have launched an initiative dedicated to strengthening both health and motor insurance enforceability with the ultimate aim of protecting the individual. Moreover, our efforts around facilitating insurance market mergers and acquisitions aiming to increase the scale and solvency of existing insurance market players. On the capital market front, we pride ourselves with the growth that we have witnessed throughout the past couple of years in both debt and equity capital markets. In 2022, we witness the first dual listing on the Saudi stock exchange. Also, the number of listed companies in 2022 on the equity capital was at a high point historically with 49 companies listed. The funds industry in KSA took a significant up-tick in the number of funds and the asset under management figures. Five international financial institutions joined the primary dealers’ program of the government local debt instruments, including: BNP Paribas, Citigroup, Goldman Sachs, J.P. Morgan, and Standard Chartered Bank. The growth that we have seen was a result of our unwary commitment when it comes to regulatory enhancement and infrastructure upgrades. When it comes to supporting start-ups, Saudi Arabia led the Middle East and North Africa region in attracting the highest number and value of venture capital investment for its start-ups in the first quarter of 2023. The Kingdom achieved a record-breaking start to the year with USD359 million in funding, according to Magnitt report. This was driven by the effort of FSDP to develop non-banking sector since the creation of the program.

The program emphasizes digital transformation and fintech innovation. Could you elaborate on the initiatives and strategies implemented to foster technological advancements and promote financial inclusion in the Saudi financial sector?

Our financial sector has always enjoyed a very good ranking when it comes to digitalization and technology advancement. The program aims at leveraging this setup even further. And since the beginning of the program, back in 2018 digitalization was a top priority with all of the subsectors having dedicated and clear initiatives that aim to digitize the sector. We have successfully digitized the whole sector with a clear impact on the beneficiaries. The number of cashless transactions has been increasing ever since at record numbers per year, reaching 62% in 2022 compared to 36% in 2019. The completion of the digitization activities allowed us to reimagine the digitization sphere of the financial sector and to increase our ambitions. Hence the inauguration of KSA FinTech Strategy in 2021, which aims to achieve the aspirations set by the Kingdom’s leadership to position the Kingdom of Saudi Arabia amongst the leading countries in the field of fintech, with Riyadh becoming a global fintech hub. With the launch of the strategy we have witnessed an increase in the number of fintechs operating in the Kingdom from 20 in 2019 to 183 in the second quarter of 2023. The strategy welcomes multinational corporations, foreign investments, and global talent to a rapidly growing sector. The strategy aspires by 2030 to increase the number of fintech companies operating in the Kingdom to 525 while creating approximately 18,000 jobs in the fintech sector, increasing the sector’s GDP contribution to SAR13 billion and increasing the value of venture capital investments into the sector to reach SAR12 billion. The strategy is equipped with numerous initiatives and activities that aim to not only stimulate the development of the fintech ecosystem in KSA, but also to play a pivotal role in increasing financial inclusion within the Kingdom by offering various products and services to beneficiaries. As a result, we have issued the open banking framework, which includes a comprehensive set of legislation, regulatory guidelines, and technical standards based on international best practices to enable banks and fintechs to provide open banking services in the Kingdom. We have also obtained the approval of the regulatory framework for equity crowdfunding, which enables the transfer of the fintech business model from the experimental environment (fintech lab) to the sustainable environment in the financial market.

The Kingdom aims to attract foreign investment and strengthen Saudi Arabia’s position as an international financial hub. What initiatives or incentives have been implemented to attract foreign investors, and what progress has been made in this regard?

Part of FSDP’s plan is creating a diversified financial sector that houses a mix of local and international investors, as well as a mix of local and international financial institutions. As such, we have allowed resident and non-resident foreign investors to invest directly in listed and unlisted debt instruments. The launch of single-stock futures contracts enables local and international investors to hedge and manage the risks of their portfolios more efficiently. We have also worked on allowing smoother accessibility to our markets by allowing international investors to benefit from the services of the International Securities Depository Center, such as Clearstream and EuroClear. This is in addition to also including both the equity and debt capital markets in multiple renowned global indices for emerging markets. As a result, the statistics around foreign investor ownership have been in line with our targets. In the first quarter of 2023, foreign investors’ ownership of the equity market cap, free float, reached 14.27%. This indicates a growing interest in Saudi’s financial markets and confidence in its economic prospects.

How is the program working to improve financial literacy among individuals and businesses in Saudi Arabia, and what are the expected outcomes?

To boost financial literacy and develop talent in the sector, the Financial Academy continues to launch programs and activities targeting specific individuals depending on the content and the objective with the aim of enhancing the Kingdom’s financial awareness, raising training standards in line with global best practices, developing specialized tests, and providing professional certificates. SAMA launched a large awareness campaign to raise financial awareness among cash traders, increase awareness of the characteristics of the national currency and security signs of the authentic paper, promote positive behavior in dealing with coins categories of currency, encourage its use in daily dealings, and develop a savings culture. The Capital Market Authority (CMA) also launched two educational programs, “Thameen” and “The Smart Investor,” which launched a total of 25 awareness campaigns on their respective platforms, focusing on topics such as financial planning, saving, investment, and investor protection. We have also launched the Zood saving product that targets Social Development Bank clients, helping them to save monthly amounts that cover their future short-term needs through a simplified savings plan. In addition, we’re enabling financial planning in the Kingdom by promoting the concept of saving by developing and launching a savings sukuk for individuals to create the first savings product supported by the government.

Finally, what are your key targets and priorities for the year ahead?

We have run our second Financial Sector Conference, which aimed to bring top global financial expertise and influential figures onto the same stage with their counterparts in Saudi Arabia to discuss significant and important topics that matter not only to Saudi, but globally as well. And we aim at continuing the discussions in the upcoming years. Our targets and priorities include supporting the growth of the financial sector through the development of regulatory frameworks that promote the entry of new financial institutions that provide diverse, innovative, and sustainable products and services in line with our goals and aspirations. These products and services must consider the needs of beneficiaries while managing the associated risk in a way that protects the financial sector’s and its consumers’ rights and supports the growth of the private sector. Our agenda also includes keeping abreast of the latest developments in the banking sector to ensure stability and growth, encourage investment, and contribute to the financial stability of the Kingdom while protecting depositors and consumers. We also seek to continue efforts around deepening the financial market and strengthen its role in capital formation. Our goal is to deepen the sukuk and debt instruments market and to raise the volume of the debt instruments market as a percentage of the GDP to reach 20.1% by the end of 2023. Finally, we aim to increase Assets under Management as a percentage of GDP to reach 27.4% by the end of 2023. We will accomplish this by strengthening institutional investment in our financial markets, deepening the investment funds sector, increasing its attractiveness to the general investors, and raising its effectiveness as an institutional investment channel.

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