RIYADH: Saudi companies stand to gain from the recently launched Contractor Financing Program by the Kingdom’s sovereign wealth fund, aimed at mitigating risks in construction sector investments.
The Public Investment Fund, with $1 trillion in real estate assets under development, announced the new program during the PIF Private Sector Forum, providing finance solutions for Saudi contractors working with its portfolio companies.
During a forum panel discussion, Mussab Al-Khudairi, senior director of PIF, emphasized the program’s goal of helping contractors manage cashflow deficits throughout a project’s lifecycle and ensuring on-time, cost-effective, and high-quality material delivery to development companies.
In collaboration with the National Infrastructure Fund, PIF has introduced this initiative to strengthen the construction sector, promote a more integrated and transparent construction ecosystem, and enhance project structures.
As per program requirements, contractors must ensure that 60 percent of materials are locally manufactured and sourced, as outlined by Al-Khudairi.
By setting these standards, the fund hopes that its specifications will “encourage the contractor to be more bullish in their investment and actually hire the adequate Saudis looking to elevate the local manufacturing,” he affirmed.
The impact of PIF’s initiatives extends beyond the targeted entities. The CEO of SABB bank highlighted that the fund’s support itself "adds credibility,” fostering encouragement for investments from banks, while speaking alongside the senior director.
Tonny Cripps noted that with PIF backing in the contracting sector, it will assist banks in “assess and understand the construction sector as an absolute requirement to deliver the infrastructure that’s planned. This will give banks confidence to lend more to the sector.”
He added that this program helps transform the prospect of increased lending to the construction sector from a possibility into a certainty.
“Our own commitment to financing the (contracting) sector, which is one of our largest, is up nearly 30 percent in just two years. So we stand behind the sector and stand behind other sectors of importance aligned with the Vision. I think this program will help us a lot. It will help the case of risk assessment and therefore lower the cost of funding,” said Cripps.
The CEO highlighted the past occurrence of the “PIF effect,” where banks, including SABB, have gained increased confidence in investing in small and medium enterprises backed by PIF support.
Within the SME sector, PIF support “in a similar way” has helped de-risk the sector and “allow banks like us and others to really stand behind growth in SMEs,” a notion which he affirmed is aligned with the Vision 2030 ambition of making SMEs a bigger part of the economy.
