Shaimaa Ibrahim

What is Peer-to-Peer Lending? 

Peer-to-peer lending (P2P lending), as a significant component of the FinTech sector, is quickly becoming the most popular alternative investment option. P2P lending enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman. P2P lending is also known as “social lending” or “crowd lending.”

P2P lending websites connect borrowers directly to lenders. Each website sets the rates and the terms and enables the transaction. Most sites have a wide range of interest rates based on the creditworthiness of the applicant. P2P services are less expensive than traditional banking institutions. As a result, lenders might earn higher returns than investors and savers offered by banks and other institutions.

Some sites specialize in particular types of borrowers. Funding Circle, for example, focuses on small businesses, while Lending Club has a “Patient Solutions” category that links doctors who offer financing programs with prospective patients. 

In 2022, the total value of global P2P lending market reached $134.35 billion, according to data published by SNS Insider. This figure is expected to reach $708.8 billion by the end of 2030. 

P2P Lending market in Saudi Arabia 

In Saudi Arabia, P2P lending market is flourishing because growing technologically advanced P2P segment with added transparency over traditional banking system, affordable operating cost & low material risk, and increasing modernization of digital technologies in the BFSI sector. The kingdom’s P2P lending market size is expected to grow at a Robust CAGR of 30.45% reaching a value of $27.96 billion by 2029, according to a recent report by BlueWave Consulting.

Major growth factors of Saudi Arabia peer-to-peer lending market include Increasing technologically advanced with added transparency over traditional banking system, lesser operating cost & low material risk and growing modernization of digital technologies in the BFSI sector. Due to banks' rigorous credit rules, the money lending system is in high demand from small and medium-sized organizations (SMEs) and consumers. This drives users to P2P lending sites, which have comparatively speedier credit approval. Also, the implementation of digitalization in the banking sector increases transparency over traditional banking systems, which is projected to boost market growth.

However, P2P lending is one of Saudi Arabia's fastest growing fintech platforms. The tremendous rise of the financial sectors has attracted an increasing number of investors to this region. Banks and corporations that have previously avoided investing in Fintech are now doing so.

When compared to the traditional approach, peer-to-peer lending services are more transparent and less expensive. Thus, all these aspects are expected to boost the expansion of the overall market during the period in analysis. However, risks associated with credit and lending are anticipated to restrain market growth.

Categories of P2P lending market in Saudi Arabia

Based on loan type, Saudi Arabia’s P2P lending market is divided into Consumer Credit Loans, Small Business Loans, Students Loans, and Real Estate Loans segments. The small business loans segment held the highest market share, and the trend is expected to continue in the following years. P2P lending platforms can be an excellent source of small company loans, especially for companies that do not qualify for regular bank or financial institution financing, as they usually have softer lending rules than traditional lenders and may be able to provide credit to small firms at cheaper interest rates. 

However, during the forecast period between 2023 and 2029, the size of Saudi Arabia P2P lending market is projected to grow at a CAGR of 30.45% reaching a value of $27.96 billion by 2029, according to a recent report by BlueWave Consulting. Major growth drivers for Saudi Arabia P2P lending market include Increasing technologically advanced with added transparency over traditional banking system, lesser operating cost & low material risk and growing modernization of digital technologies in the BFSI sector.

Further, ongoing Saudi Vision 2030 promotes the digitization process to achieve higher efficiency and performance in different industry verticals. The rapid adoption of digitization by the BFSI industry fastens the process of loan lending and is easier than the traditional method. High-end investments by the major players to upgrade the existing infrastructure of the Digital Lending platform and coupled with higher adoption of advanced technologies such as artificial intelligence, machine learning, cloud computing is expected to benefit the growth of the Digital Lending market in the next five years.

Saudi P2P lending market top players 

Saudi Arabia’s major players operating P2P lending market include Tabby, Lendo, Raqamyah, Tammwel, Forus, Abdul Latif Jameel United Finance, Tamam, and Raya Financing Company. These companies adopt various strategies, including mergers and acquisitions, partnerships, joint ventures, license agreements, and new product launches, for the sake of enhancing their market share.

The Saudi market has several platforms to have a vital role in empowering SMEs across the kingdom through facilitating loans for SMEs. These platforms include Raqamyah, Forus, and Lendo. 

As for Raqamyah, it uses innovative technology to connect small businesses seeking fast, affordable finance with lenders who could help fund their growth. By lending directly to businesses through Raqamyah, lenders earn attractive returns while businesses get fast, easy access to funding at competitive rates to grow, create jobs, and drive the economy forward.

On the other hand, Forus is a crowdfunding platform that bridges the gap between finance and SMEs, helping small businesses access the capital they need to grow and thrive. The platform enables borrowers to showcase their business potential and attract investment from individuals and institutions looking to support promising ventures.

The last platform is Lendo, a shariah-compliant P2P digital lending marketplace. The platform helps pre-finance outstanding invoices for businesses in the kingdom via offering a variety of financing products for SMEs with an initial focus towards pre-invoicing finance.