Saudi Central Bank SAMA Introduces BNPL Regulations Following UAE's Lead

Saudi Arabia's Central Bank, SAMA, has recently announced stringent regulations governing Buy Now, Pay Later (BNPL) activities within the Kingdom.

The comprehensive guidelines, outlined in an official release, aim to offer clarity and oversight to this burgeoning financial sector.

These guidelines encompass several crucial provisions, emphasizing the need for BNPL entities to establish a local headquarters with a minimum capital of SAR 5 million.

Moreover, there's a strong emphasis on nurturing local talent, mandating that the initial workforce should consist of at least 50% Saudi nationals, gradually increasing to 75% over time at a rate of 5% annually. Notably, recruitment of non-Saudis is strictly limited to roles that require expertise unavailable in the local labor market.

These regulations also enforce stringent compliance standards, covering a broad spectrum from technology and Anti-Money Laundering (AML) practices to data privacy and consumer protection.

Additionally, BNPL offerings are subjected to specific limitations, such as a maximum credit cap of 5,000 SAR and a tenure of less than 12 months, with a clear prohibition on cash collection as part of these transactions.

This regulatory overhaul follows the global explosion of BNPL platforms, with the Middle East surfacing as a pivotal growth hub. Meanwhile, the Central Bank of the UAE unveiled a similar framework to regulate short-term credit facilities, aligning with the region's efforts to bolster financial inclusion, innovation, and stability. As a matter of fact, the updated framework in the UAE redefines the management of short-term credit provision, allowing entities to function under licensed banks or finance companies, subject to CBUAE approval. It introduces the option for entities to operate as Restricted License Finance Companies directly licensed by the CBUAE.

Unlicensed entities engaged in short-term credit activities are given two choices: apply for a Restricted License Finance Company license or partner with licensed finance companies or banks for compliance and continuity.

Through these clear guidelines, regulators aim to safeguard the interests of consumers and service providers while fostering a robust and innovative financial ecosystem, ensuring stability and integrity within the sector.