The Saudi SME landscape is rapidly expanding and evolving, buoyed by government spending — and SME financing needs are expanding, too. Hot on the heels of getting approval for MENA’s first open-ended, sharia-compliant direct lending fund, we talked to Sukna Capital’s CEO Fares Bardeesi, to find out what SMEs need from financial structures — and what businesses can do themselves — to get the finances needed to keep the lights on and expand their operations.

The Kingdom is bent on giving SMEs the lifelines they need: Monshaat, the SME Bank, the National Development Fund, and Kafalah, among others, are making a lot of progress in ramping up SME lending, aiming to reach the 20% target laid out in Vision 2030. The share is still hovering around the 9% level as of 3Q, with the SME financing gap estimated at to exceed SAR 300 bn.

The hangup? Finance structures are yet to keep up. Traditional banks are designed to meet the needs of large corporates with standardized, collateral-driven products, Bardeesi told us. Meanwhile, most SMEs do not have formal credit records and operate with variable cashflows. They need faster, more flexible financing tailored to the realities of SME operations.

A more adaptive approach is needed: Financial institutions need to incorporate real-time data, cashflow-based underwriting, and sector-specific analysis to assess SME viability, Bardeesi said. Risk assessment and decision-making could also benefit from the use of technology by adopting automated data collection, predictive analytics, and digital onboarding.

Regulations are evolving: The Saudi Central Bank (Sama) and the Capital Markets Authority (CMA) have been introducing sandbox frameworks and licensing pathways that led to the rise of flexible lending structures, Bardeesi notes. “The recent approval of Sukna Capital’s open-ended credit fund is a strong example of how capital market regulation is already evolving to accommodate new structures — such as private debt funds and revenue-based financing vehicles — that are built specifically with SMEs in mind.”

More work needs to be done: Expanding risk-sharing tools such as first-loss mechanisms and co-investment models can drive private sector participation. Tax incentives and streamlined licensing for non-bank financial institutions will also be critical in scaling alternative lending, according to Bardeesi.

SMEs have a part to play too: Many SMEs lack formal reporting practices or systems to track financial performance, making it harder for lenders to assess their creditworthiness, Bardeesi told us. Adopting cloud accounting or cashflow monitoring tools can help improve visibility, with the help of government and ecosystem partners.

“Bankability isn’t only about having audited financials,” Bardeesi noted. Lenders — including Sukna Capital — are already focusing more on actual performance when making underwriting decisions, checking if companies can demonstrate predictable revenue, operational discipline, and showing sector-specific strengths. “If more of the market adopts that view, we’ll see a meaningful shift in how capital flows to high-potential SMEs,” Bardeesi said.

DATA POINT- Financing for micro, small, and medium enterprises (MSMEs) jumped 30.6% y-o-y in 1Q, reaching SAR 383.2 bn, according to the Sama’s latest monthly report (pdf). MSME credit accounted for 10.1% of total credit facilities in the Kingdom during the quarter, up from 8.9% in the same period last year. Medium-sized enterprises received the lion’s share with SAR 190.2 bn — a 18.4% increase y-o-y.

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