Al-Hayat

 

SAUDI banks are fortunate enough to sleep and get up on a cushion of money, which is being poured in mainly from current accounts and deposits that customers are hesitant to invest in anything else.

 

The banks earn huge amounts of profit from these deposits without any efforts or difficulties. This eventually enables the banks to come on top of banks in the Middle East in volume of profits. Therefore, it is not strange that the chairmen of the board of directors or directors general of banks are able to remain in their positions without any change for several years and there was no question of heads rolling at the helm of these banks.

 

According to banking figures, Saudi banks posted SR38 billion in profits in 2013, compared to SR35 billion in the previous year, and this profit could be described as the highest or unprecedented in their history. 

 

I am not envious of these banks because of their huge margin of profit. Similarly, I am not going to alert the Saudi Arabian Monetary Agency, the central bank, to beef up monitoring of these banks.

 

But I want to draw attention to the fact that the contribution of these banks toward shouldering their social responsibility is very little despite the huge profits they earn. In advanced countries, banks earmark 15 to 25 percent of their profits for funding social responsibility projects. However, as for Saudi banks, they allocate only 2 percent of their profits to this.

 

Of course, the banks have the right to grow robustly with a huge margin of profits. This was made possible mainly because nearly 70 percent of customers prefer to park their money in the banks without pumping them into investments. They are also not willing to make any fixed deposits for fear of corrupting their wealth with usury. Therefore, most of their deposits are in current accounts, facilitating the banks to use them. Moreover, the banks see nobody else competing with them in this sector.

 

There has been a 30-fold increase in the volume of personal loans given by banks over the past 16 years, reaching more than SR1 trillion. Nearly 90 percent of these loans go to buy cars, build or renovate houses, continue higher studies and such other purposes. Only a small portion of loans went to finance small projects of Saudi youths.

In this scenario, the concerned authorities shall come forward to end the monopoly of banks through setting up of special financial institutions to support small investment projects and thereby easing the burden on the state-owned financing agencies.

 

I wrote earlier about the initiative made by some charity societies to financially support small and medium enterprises (SMEs). The best example for this is Bab Rizq Jameel. Similarly, we need specialized firms to provide personal loans for housing, education and other purposes to end the monopoly of commercial banks in this respect. This will facilitate the pumping of more money into this sector in addition to creating a healthy competition. It will also help rein in illegal financial firms, which extend loans on attractive terms but are engaged in this activity to cover their money laundering and illegal trade.

 

While underlining the need for setting up of alternative financial institutions to support ordinary citizens and small enterprises, as well as to end the monopoly of banks in personal financing, I would draw attention to an interesting development in Britain. 

 

Recently I read a local newspaper report about the entry of retail stores in Britain into a direct competition with in customer service. Creating a big headache for the banks, which are slowly coming out of stagnation, a chain of retail giants announced that they are going to start loan facilities for its customers by opening current accounts for them.

 

Tesco Stores, the biggest retail chain serving 17 million citizens in Britain, announced that it will give special discounts on goods to its customers who open current accounts. Marks & Spencer also made a similar announcement. 

William Rogers, executive director of Tesco, said their studies showed that a major segment of citizens are receptive to their plan. “We make available everything that a customer needs, including household goods, payment of utility bills, money transfer and the like under one roof.”

 

Well, we should no longer be at the mercy of banks. We need real competitors to make the capital market active and competition stiff among the service providers. This is also essential to prevent the banks from becoming five-star hotels for their officials to stay at the expense of customers in due course of time.