JEDDAH - An estimated 2.3 million people in Saudi Arabia have taken out loans from the Kingdom’s banks, with consumer loans of SR275 billion representing 80 percent of the total value.
The figure exceeds genuine demand based on need due to fierce competition between banks, according to Essam Mustafa Khalifa, a senior marketing planner and member of the Saudi Economic Society.
“Banks encourage personal loans because they bring huge profits,” Khalifa said.
“If consumer loans keep growing at this rate, the banks will turn into installment companies like cars firms.”
Khalifa said the figures were “a dangerous indication” of heavy financial obligations on individuals whose income may not cover their remaining expenses, but expects the figure to rise as the Saudi credit market prepares for unprecedented growth in personal loans taken out by holidaymakers ahead of the summer vacation.
“The summer is traditionally high season for local banks as thousands of holidaymakers apply for credit cards to fund tourist trips and purchases in the Kingdom and abroad,” Khalifa said.
“To attract holidaymakers most banks offer easy loans as they know that this is a high-spend group during the summer vacations.”
“People who have trouble obtaining personal loans turn to credit cards which are usually used irrationally, resulting in the accumulation of debt.”
Khalifa said that the public needed warning about the dangers of the loan culture. – Okaz/SG