The Financial Center in the Saudi Financial Market: Transformation and Its Role

The financial center in the context of the Saudi financial market (Tadawul) represents an integrated platform that combines financial institutions, banks, investment companies, financial markets, and consulting services under a unified regulatory oversight. It aims to manage capital efficiently and develop the national economy by providing a modern and advanced business environment. This concept goes beyond the idea of a single entity to encompass an integrated system managed by the Capital Market Authority (CMA) and the Ministry of Finance, based on advanced infrastructure in the heart of Riyadh. The financial center is a strategic pillar of Vision 2030, serving as a bridge to attract capital, attract global talents, and stimulate financial innovation. This is translated through projects such as the financial free zone in Riyadh and the King Abdullah Financial District (KAFD), along with updating laws that allow full foreign ownership of financial companies and facilitating the entry of global investors. The financial center reflects the Kingdom's ambition to transform into a regional and global hub for finance and business, ensuring transparency, protecting investors, and enhancing the competitiveness of the Saudi economy on an international level.

The infrastructure of the Saudi financial center is based on a set of integrated elements that include financial markets (Tadawul), commercial and Islamic banks, securities companies, insurance companies, regulatory bodies, and FinTech centers. The financial city in Riyadh (KAFD) represents an advanced model of this infrastructure, bringing together the headquarters of regional and global banks, investment companies, and incubators for emerging businesses. The financial free zone is one of the most important initiatives, as it allows flexible licensing for foreign investors and provides an integrated business environment. An advanced digital infrastructure has been developed, including modern electronic trading systems, platforms for debt instruments and financial derivatives, and advanced digital payment systems. The Kingdom has also established the Innovation Financing Fund (SPARK) to support startups in financial fields, enhancing digital transformation and innovation in the sector. This infrastructure integrates with an advanced legislative system that ensures transparency, protects investors, and supports the growth of innovative financial products.

The financial center occupies a pivotal position in Saudi Arabia's Vision 2030 strategy, which aims to diversify the national economy and reduce dependence on oil revenues. The financial center contributes to achieving the vision's goals by attracting foreign investments, enhancing liquidity in markets, and providing a competitive business environment that supports innovation and development. Among the specific objectives of the vision is to elevate the Kingdom's ranking among the top 10 global financial centers by 2030. To achieve this, a series of initiatives have been launched, such as developing the financial free zone, updating financial laws, and facilitating the establishment of global financial companies in the Kingdom. The government is also working to stimulate the establishment of international banks and branches of established financial companies in Riyadh, enhance financial inclusion, and develop new financial products that meet the needs of the local and global market. This role is reflected in the increase in foreign investor ownership, the rise in trading volume, and the expansion of available financial products in the Saudi market.

The Kingdom of Saudi Arabia adopts a series of initiatives and policies to support the financial center and develop the financial sector in general. Among the most prominent of these initiatives is the launch of the financial free zone in Riyadh, which allows full foreign ownership of financial companies and offers tax and procedural facilities, in addition to updating the capital market system and issuing licenses for new banks and financial companies. The Capital Market Authority (CMA) has issued a set of regulations and guidelines that enhance transparency, facilitate financial disclosure, and support investor protection. Government policies also include developing the digital payment infrastructure, supporting financial innovation through Sandbox platforms, and adopting blockchain technologies and digital payments. The government focuses on enhancing human capital efficiency through advanced training and qualification programs, and stimulating the attraction of global financial talents. Additionally, special incentive programs have been launched to support startups and foreign investors, aiming to create a competitive and sustainable business environment.

The Saudi financial market has witnessed significant developments during 2024 and 2025, reflected in market capitalization growth, increased trading volume, and an expanded base of foreign investors. The market capitalization of listed companies reached approximately 12 trillion Saudi Riyals by the end of 2024, showing a clear increase from previous years. The number of listed companies rose to around 220, with sectors diversified among banks, petrochemicals, trade, and industries. The average daily trading volume recorded about 10 billion Riyals, while the TASI index surpassed the 12,000-point mark for the first time. The percentage of foreign investor ownership also increased to 10% of the total market, compared to just 2% a few years ago. The market also saw an expansion in the issuance of sukuk and bonds, and an increased reliance on innovative financial products such as Global Depositary Receipts (GDR). These developments reflect the dynamism of the Saudi market and its ability to attract investments and achieve financial transformation goals.

The Saudi financial center offers a wide range of financial products and services that meet the needs of local and international investors. These products include trading in stocks, bonds, and sukuk, financial derivatives such as futures and options, asset management services, financing and investment, insurance, and financial brokerage services. Recently launched advanced digital platforms facilitate trading and financial management operations, in addition to digital payment services and advanced FinTech technologies. The financial center supports the development of investment funds and exchange-traded funds (ETFs), and provides investor protection mechanisms through disclosure systems and good governance. The financial free zone allows flexible licensing for global banks and major investment companies, offering tax and procedural incentives to stimulate innovation and adopt new financial products. These services integrate with an advanced legislative system that ensures transparency, protects rights, and enhances competitiveness in the market.

The financial center belongs to the financial, banking, and investment services sector, which is one of the most dynamic and growing sectors in the Kingdom. The sector includes commercial and Islamic banks, securities and asset management companies, insurance companies, and specialized financing companies. The Saudi financial sector is characterized by strong banking control from the Saudi Central Bank (SAMA), and relative stability supported by high oil prices and increased government deposits. The sector has seen an expansion in the issuance of bonds and sukuk, and growth in innovative financial products such as payment applications and crowdfunding. Among the main challenges facing the sector is the need to enhance financial inclusion, diversify income sources, and update the legislative framework to keep pace with international standards. Despite regional and international competition, the Saudi financial sector shows a high ability to adapt to changes and achieve sustainable growth, supported by government policies and ongoing investments in infrastructure and technology.

Competition in the Saudi financial center sector varies according to the activities of companies and the products they offer. At the local level, major commercial banks such as Al Rajhi Bank, National Commercial Bank, Riyad Bank, and Alinma Bank compete with securities companies like Al Ahli Capital and Al Jazira Capital. Major insurance companies and financing companies also emerge as part of the competitive environment. At the regional level, the Kingdom competes with established financial centers such as the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) in the UAE, striving to attract global talents and investments. Internationally, it competes with major financial cities such as London, New York, Hong Kong, and Singapore, focusing on competitive advantages such as Islamic finance, large economic size, and advanced infrastructure. The Kingdom benefits from a large local market and a growing business environment, providing a real opportunity to enhance its position as a global financial center in the coming years.

The years 2024-2025 witnessed a series of important developments in the Saudi financial center. The expansion of foreign investor licensing pathways was announced, along with the launch of a new financial free zone in Riyadh to attract global financial institutions. The Capital Market Authority issued a set of new laws to enhance transparency and protect investors. Tadawul also expanded its offering of financial derivatives and launched advanced electronic platforms. Recent economic reports indicated interest from global banks such as Deutsche Bank and HSBC in opening branches in Riyadh, boosting international confidence in the Saudi financial sector. Global indicators showed significant progress for Riyadh in the Global Financial Centres Index (GFCI), and prominent international conferences such as the 'Middle East Islamic Finance Initiative' were held to sign strategic partnerships supporting sector growth. These developments reflect the Kingdom's commitment to achieving the goals of Vision 2030 and transforming Riyadh into a global financial center.

Assuming there is a company named 'Financial Center' listed in the Saudi market, a model for financial performance can be presented based on the available hypothetical data. The company's stock price was approximately 25 Saudi Riyals at the end of 2024, with an estimated market capitalization of about 50 million Riyals (based on two million outstanding shares). The price-to-earnings (P/E) ratio was about 10 times, while the cash dividend yield was around 4% annually (one Riyal per share). The results for the third quarter of 2024 showed a revenue increase of 20% (30 million Riyals) and a net profit increase of 40% (7 million Riyals) compared to the previous year, indicating strong operational performance growth. The company aims to raise its annual revenues to 150 million Riyals with a profit growth of no less than 15% annually. These indicators reflect an active and competitive business environment within the Saudi financial services sector.

Financial legislation and regulations play a pivotal role in enhancing the Saudi financial center and providing a safe and attractive investment environment. The Capital Market Authority (CMA) has issued a package of laws and guidelines that ensure transparent financial disclosure, protect investors, and govern companies. These regulations included updating the capital market system, facilitating establishment procedures, and adopting international governance standards. The Kingdom has also launched the financial free zone that allows full foreign ownership and offers tax incentives, along with reliable electronic payment systems. The advanced legislative framework provides a modern regulatory environment that contributes to attracting global financial institutions, supporting innovation, and enabling the private sector to grow. Regulatory bodies continue to review and update laws to keep pace with global developments and ensure the highest levels of transparency and efficiency in the Saudi financial market.

Foreign investments are one of the essential pillars for the growth of the Saudi financial center and achieving the goals of Vision 2030. Recent reforms have allowed an increase in the percentage of foreign ownership in financial and investment companies, leading to an increase in foreign investor ownership to 10% by the end of 2024. The financial free zone in Riyadh offers opportunities for international investors to establish their companies with full ownership, along with tax and procedural facilities. Foreign investments contribute to enhancing liquidity, transferring global expertise and knowledge, and stimulating financial and technological innovation. Strategic partnerships with global financial institutions also support the development of the local market and provide advanced financial products and services that meet the needs of the Saudi economy. Attracting foreign investments remains a top priority for government entities, and efforts continue to develop incentives and regulations that ensure a competitive and secure business environment.

The Saudi financial center has promising growth opportunities and the potential to transform into a global financial center over the next decade, supported by the size of the local economy, legislative reforms, and advanced infrastructure. Among the main challenges that the financial center may face are regional competition from centers like Dubai and Abu Dhabi, the ongoing need to update legislation, and ensuring market stability amid fluctuations in oil prices and geopolitical events. Attracting global talents and developing human capital also represent a pivotal challenge for achieving sustainability and growth. On the other hand, technological innovations, the expansion of financial products, and international partnerships offer significant opportunities to enhance the Kingdom's position as a regional and global financial center. Continued government commitment and collaboration between the public and private sectors will be crucial factors in achieving the future ambitions of the Saudi financial center.