The Saudi Arabian Monetary Authority (SAMA) has exempted beneficiaries of the Real Estate Development Fund and the Ministry of Housing from the “Principles of Responsible Financing,” provided that the monthly credit obligations arising from the financing do not exceed 65 percent of the customer’s total monthly income.
This came as part of amendments made by the Authority to two articles of the Responsible Financing Principles for Individuals, based on the powers granted to the Authority under regulations, rules, and instructions.
The first amendment to Initiative (14/c) now states that government subsidies received by the customer, such as those from the Citizen Account Program or Social Security, shall not be included in the customer’s total monthly income, however, government support contractually documented with the citizen and provided by the Ministry of Housing or the Real Estate Development Fund may be included in the customer’s total monthly income for mortgage products.
As for Article (15/c), it has been amended so that the monthly credit obligations arising from the financing shall not exceed 55 percent of the customer’s total monthly income, however, for customers benefiting from the Ministry of Housing or the Real Estate Development Fund through mortgage financing products, the monthly credit obligations arising from the financing must not exceed 65 percent of the customer’s total monthly income.
The principles of responsible financing aim to encourage responsible financing that meets customers“ actual needs, particularly those related to acquiring housing and assets rather than for consumer purposes, and to promote financial inclusion by providing appropriate financing to all segments of society while ensuring that the debt-to-income ratio remains within a range the customer can afford.
The Authority previously clarified that these principles also aim to ensure fairness and competitiveness among lenders (banks and finance companies subject to the Authority’s supervision and licensed to engage in one or more financing activities), thereby maintaining the effectiveness of the procedures and mechanisms they follow and ensuring their efficiency.
These principles apply to all lenders and govern customer-oriented financing activities, which include all credit products and programs directed at individuals, including, but not limited to, personal financing, vehicle financing, credit cards, and mortgage financing.
The Authority stated that all provisions of these principles are effective as of August 12, 2018, and full compliance with all these principles is required from that date.
