It has been revealed that banks are owed SR2.4 billion in bad debt, representing 1.2 percent of the total personal loans of SR200 billion in the country at the end of the first quarter of 2010. This has been disclosed by Nabeel Al-Mubarak, Director General of the Saudi Company for Credit Information (SIMAH). Mubarak, however, considers this a “very low percentage” which he attributes to the conservative policies followed by the financing sector in the Kingdom. He added that the total personal loans paid back to banks have exceeded SR760 billion. Al-Mubarak said that the total bad debt owed to local banks, whether by individuals or companies, including debt arrears, bills to telecommunication companies and credit cards, now total more than SR25 billion at the end of the first quarter of 2010. He attributed the reason for the bad debt in personal loans to the lack of a credit culture, which he described as “very weak”, and the existence of a culture of consumption. He said Gulf societies in general lack a savings culture, but this is also widespread in other parts of the world. Local banks have raised their expectation for credit losses during 2009 to over SR10 billion, compared to 2008 when it totaled SR3.2 billion. Over the past decade, banks have created small allocations for credit losses compared to the total loan portfolios. However, the allocations they created during 2009 were 1.4 percent of the total loan portfolios of SR767.2 billion. In addition, the percentage coverage for bad debt in personal loans decreased to 90 percent at the end of 2009, compared to 120 percent by the end of 2008.
