Saudi Industrial Developmenet Fund (SIDF)

INTRODUCTION:

The Saudi Industrial Development Fund was established by a Royal Decree issued for this purpose in 1394H. As a funding agency affiliated with the Ministry of Finance and National Economy, SIDF grants medium and long-term, soft loans for private industrial project as well as administrative, financial, technical, and marketing consultancy services to help develop and enlarge the industrial base of the Kingdom.

The government allocated the capital necessary for the start up of SIDF, in its early beginning, with an initial capital of SR 500 MM, which was increased gradually until it reached its current level of SR 20 Billion in 1426. It was for this support that the Fund could assume and continue its leading role among a number of government institutions concerned with industry in achievement of the objectives and policies of the Kingdom's industrial development programs geared towards the support of the private sector in manufacturing industries fields.

OBJECTIVES:

The corporate mission of the Fund is to assume an active role in the achievement of goals, policies and programs of industrial development within the Kingdom through provision of all types of financial and advisory support warranting a sustainable growth and prosperity of local industry and upgrading its overall performance.

The role of SIDF in industrial development requires verification and confirmation of the feasibility of the macro and micro economic implications of borrowers projects. It also calls for the increase of projects potential of success through optimum allocation of invested capital. SIDF spares no effort to fulfill several prime strategic objectives in the context of supporting industrial development of the Kingdom, including:

•  The achievement of good return on investment

•  Ascertaining that there is an adequate local value added to national economy

•  Replacement of imports by local products

•  Promotion of non-oil exports

•  Realization of industrial integration among the various sectors

•  Creation of employment opportunities for Saudi nationals through encouragement of national manpower.

•  Optimizing exploitation of available local raw materials

•  The attraction of foreign capital as well as the transfer and normalization of technology

•  Promotion of industrial safety and loss prevention

•  Protection of environment

LENDING PROCEDURES:

•  SIDF extends soft loans to Saudi and foreign companies and firms duly registered in the commercial registries within the Kingdom and holding industrial licenses to engage in manufacturing activities in the Kingdom. It provide up to 50% of the cost of eligible projects regardless of their ownership.

•  There are certain industrial sectors which have been closed to SIDF financing, due to self-sufficiency in their products.

SIDF's Lending Policies and Procedures:

•  All registered companies or establishments with industrial licenses to engage in manufacturing within the Kingdom are eligible to apply for SIDF loans.

•  Projects must be viable from a marketing, technical and financial point of view.

•  Loans are provided for a maximum term of 15 years with the repayment schedule designed to match the projected cash flow of the borrowing projects.

•  SIDF finance up to 50% of the fixed assets, pre-operating expenses and start-up working capital. However, it does not finance the purchase of used machinery or equipment.

•  SIDF requires that owners' equity represent at least 25% of the project cost, as a minimum.

•  As security for any loan extended, SIDF obtains a mortgage on the projects' fixed assets, personal guarantees from the shareholders of limited liability companies. It is likely that other additional guarantees be requested regarding projects where investment involves high risks.

•  The loan processing time is dependent on the completeness of the information provided by the loan applicant.

•  Disbursement of the approved loan is undertaken in accordance with the progress of project implementation, backed by the appropriate supporting documents.

It is a requirement of SIDF that borrowers undertake to:

1. Source all building materials and equipment required for their projects from local manufacturers, if any. SIDF will specify such materials at the time of the project's appraisal.
2. Award all engineering works related to the technical feasibility, design and supervision of construction of the project to local consulting engineers, but possibly in conjunction with foreign firms, as deemed necessary. Exceptions to this rule would only be highly sophisticated projects requiring expertise that is not readily available in the Kingdom.
3. Engage local, certified auditors in the early stage of the project's implementation and continue this arrangement until full repayment of the loans committed to them by the Fund.
4. Bear charges for the actual services relating to the evaluation of their projects. The costs chargeable by SIDF for such services will be determined at the time of the formal registration of such applications, in addition to follow-up costs chargeable on basis the actual work undertaken.

Documents required for the registration of the loan application as a pre-screen are:

•  Industrial License

•  Feasibility Study

•  Loan Application Form

The documentation needed to complete an application file are as follows:

1. A duly completed copy of the application for a loan (SIDF Loan Application Form).
2. A copy of the Industrial License.
3. Detailed and recent feasibility study of the project in Arabic or English (should not date back more than one year from the date of the loan application).
4. A copy of the Commercial Registration (if the Commercial Registration has not yet been obtained, a copy of the draft articles of association may be temporarily accepted for companies).
5. A copy of the land lease agreement for the allotted plot of land in the industrial city, or a copy of the land title deed.
6. A duly completed Personal Net Worth form for each individual shareholder.
7. Three detailed quotations for machinery and equipment from different sources showing their technical specifications, together with their catalogues.
8. Full set of the plant building drawings including machinery layout.
9. Three quotations for implementation the buildings and civil works supported by bills of quantities.
10. Three quotations from different sources for raw and packaging materials used in manufacturing the proposed products.
11. If there is an agreement with another party for plant erection, supply of its machinery and equipment, operation, management, and provision of technical know-how, marketing and distribution or any other agreements related to the project, a copy should be included.
12. As for expansion, modernization or upgrading projects, audited financial statement for the past 3 years must be submitted.

The basic documentation needed for signing the Loan Agreement are:

•  Copy of the Industrial License along with the original for matching.

•  Copy of the Commercial Registration along with the original for matching.

•  A notarized copy of the Articles of Association along with the original for matching (in the case of companies only).

•  A copy of land lease agreement or original land title deed.

•  An authorization from the competent authority to the individual entrusted with powers to sign.

•  A detailed copy of the list of plant's fixed assets to be mortgaged to the Fund.

Small & Medium Enterprises Financing Guarantee Program

• SIDF is managing the S&M Enterprises Financing Guarantee Program which is found to overcome the obstacles impeding the financing of Small and Medium enterprises unable to provide adequate guarantees to commercial banks, and to encourage such banks to expand their base dealings with Small and Medium enterprises. The program provides guarantees covering up to 50% of guarantable financing extended by commercial banks participating in the program to SMEs.

• This program is expected to achieve the following results:

•  Increasing the number of Small and Medium enterprises.

•  Increasing the activities of existing projects, which would contribute to upgrading the standard and efficiency of operation.

•  Absorbing the surplus of liquidity with banking institutions and channeling it towards Small and Medium enterprises through increasing the credit worthiness of such projects.

•  Attracting a segment of entrepreneurs who are not used to dealing with banks so as to tap on the services of the banking system.

• Procedure for applying for financing and program guarantee:

SMEs owners should apply to participant banks (i.e. Riyad Bank, National Commercial Bank, SAMBA Group, SABB, National Arab Bank, Al-Rajhi Bank, Al- Saudi Al-Faransi Bank, Al-Saudi Al-Hollandi Bank, Al-Jazirah Bank, and Saudi Investment Bank) for financing together with a feasibility study, supporting documents, and other information required by banks. In case of the bank's approval of extending the requested financing, the bank shall file a request for a program guarantee, which shall be processed and approved by the competent program officers should the request satisfy the requirements for issue of the guarantee.

Saudi Industrial Development Fund

P.O. Box # 4143 , Riyadh – 11149

Tel: 01-477-4002

Fax: 01-479-0165

E-mail: sidf@sidf.gov.sa

Website: WWW.sidf.gov.sa