With a population of approximately 36 million, Saudi Arabia is one of the most populous countries in the Middle East. Its oil wealth has had a major impact on the country's economy in recent decades. But how will the story of ‘As-Saudiya’ continue, given the foreseeable scarcity of resources and the need for demographic and social adjustment?
This is a question that has been answered in the ambitious Saudi Vision 2030 programme. Since 2016, this programme has been preparing the country for a future in which oil is no longer its sole economic lifeline. In 2026, the programme will enter its third and final phase. Important components of this radical change include economic diversification, opening up to foreign capital and reforming the financial sector. For example, the Saudi capital market will be fully opened to foreign investors from 1 February 2026. As part of the financial reforms, banking supervision has been modernised and a focus placed on digitalisation and the promotion of fintech. At the same time, Saudi Arabia plans to invest US$20 billion in artificial intelligence (AI) alone by 2030.
It is interesting to note that small and medium-sized enterprises (SMEs) are at the heart of Saudi Vision 2030. Previously, these companies had little access to financing, resulting in relatively low productivity and innovation rates. The programme deliberately redefined the role of SMEs in Saudi Arabia. The aim was and is to increase their share of GDP – among other things by facilitating access to credit and simplifying start-up processes. Financing instruments such as factoring and supply chain finance (SCF) also come into play as part of this special SME support. Previously, both had played no role at all or only a minor one in the Saudi economy. Saudi Vision 2030 has made important contributions to the promotion of factoring and SCF, including increasing regulatory clarity under the supervision of SAMA. As a result, both financing instruments have now found their way into the Saudi economy and are used as effective liquidity instruments.
While traditional factoring is already considered to have great potential in Saudi Arabia, SCF can truly be described as a game changer. Why is that? SCF is particularly well suited to the country's economic structure, which is dominated by state-owned companies, known as PIF companies, and large corporations. There is also the political will to stabilise SMEs in supply chains. The increasing digitalisation in the country is further promoting the momentum of this development. There are already numerous successful case studies for the introduction of SCF in the Saudi economy. One example is the project by Saudi British Bank (SAB), which has introduced a Sharia-compliant supply chain finance solution (payables finance) as part of Saudi Vision 2030 – the first of its kind in the kingdom. It allows suppliers to receive early payments based on the creditworthiness of buyers without drawing on their own credit lines.
This brings us to another important aspect of the Saudi economy: Islamic finance. The fact is that the entire legal system is based on Sharia law, interest (riba) is rejected both legally and religiously, and Sharia compliance is not ‘optional’ but implicitly expected. Unlike in many neighbouring countries, Islamic finance in Saudi Arabia is not a niche sector but the default framework, even if products are not always explicitly labelled as ‘Islamic finance’. It is also a fact that Islamic finance has so far played a rather conservative rather than a transformative role. Under Saudi Vision 2030, this is interpreted functionally, not ideologically. The aim is to combine modernisation with religious legitimacy, i.e. to successfully combine Islamic finance with digitalisation, fintech and SME promotion.
Within this transformation, Islamic finance plays a structurally central role in the Saudi market. Unlike jurisdictions where Islamic finance exists alongside conventional finance, Saudi Arabia’s financial system is inherently Sharia-based. Commercial law, financial contracts, and regulatory practices are rooted in Islamic principles, making Sharia compliance the implicit standard rather than an optional feature. As a result, many financial products are compliant by default, even when not explicitly labelled as Islamic.
Historically, this framework encouraged a conservative, form-driven approach. Banks relied primarily on well-established structures such as Murabaha and Ijara (Islamic leasing), which provided legal certainty and stability. While effective for large corporates and asset-heavy financing, this approach limited innovation in areas such as SME working capital, trade finance, and dynamic liquidity management. As the Saudi economy diversified and supply chains grew more complex, the limitations of traditional structures became increasingly visible.
Saudi Vision 2030 has driven a shift towards a more functional interpretation of Islamic finance, focusing on economic substance and real-economy impact rather than contractual form alone. This perspective aligns closely with the objectives of Sharia (Maqasid al-Sharia), particularly the promotion of productive activity, value creation, and equitable risk distribution. Islamic finance is therefore being repositioned as an enabling framework for growth rather than a constraint on financial innovation.
This evolution is particularly evident in the expansion of Sharia-compliant factoring, supply chain finance, and leasing solutions. While factoring and SCF address short-term liquidity needs linked to trade flows, Islamic leasing (Ijara) plays a complementary role by facilitating access to productive assets without interest-based borrowing. Together, these instruments form a coherent toolkit that supports SMEs across both operational and investment cycles, all while remaining firmly grounded in real economic activity.
Regulatory support has been a key enabler of this transition. Under the supervision of Saudi Central Bank (SAMA), the regulatory framework has evolved to accommodate innovative Sharia-compliant models, including fintech-driven platforms and non-bank financial institutions. Increased clarity around licensing, governance, and supervision has strengthened market confidence and encouraged wider adoption of Islamic finance solutions.
The strategic relevance of Islamic finance is especially pronounced in SME development. By combining supply chain finance, factoring, and leasing structures, SMEs can access liquidity, equipment, and growth capital without relying on conventional debt. This not only improves financial inclusion but also enhances supply chain stability and productivity—core objectives of Saudi Vision 2030.
Digitalisation further amplifies these effects. Embedding Sharia-compliant financing structures into digital platforms reduces transaction costs, improves transparency, and increases scalability. Initiatives such as the Sharia-compliant supply chain finance programme introduced by Saudi British Bank (SABB) demonstrate how Islamic finance can support advanced financing solutions while remaining aligned with national development priorities.
In the long term, this integrated and functional interpretation positions Saudi Arabia as a potential global hub for Islamic trade finance, leasing, and fintech innovation. As the economy transitions towards a post-oil model, Islamic finance—anchored in real assets and enhanced by technology—may emerge as one of the kingdom’s most resilient and strategic competitive advantages.
Conclusion
Saudi Arabia's Vision 2030 program, launched in 2016 and entering its final phase in 2026, aims to diversify the economy away from oil dependency through reforms including economic diversification, attracting foreign capital, and modernizing the financial sector, with a significant focus on developing small and medium-sized enterprises (SMEs) and investing in artificial intelligence. A key aspect of this transformation is the functional interpretation and integration of Islamic finance principles with modern financial instruments like factoring, supply chain finance, and digitalization to support SME growth and innovation, positioning Saudi Arabia as a potential global hub for Islamic trade finance and fintech.
Sources:
Vision 2030, Annual Report 2024
ecza.gov.sa/en/vision-2030
www.sama.gov.sa/en-us