SAAB Enters New Inventory Financing Solution For KSA Importers And Exporters

The Saudi British Bank or SABB has long since been trying to improve its offerings to re-exporters and importers in the KSA (Kingdom of Saudi Arabia). And keeping in line with this attempt, they finally completed their first sharia-compliant inventory finance transaction in March.

According to this deal, the SABB will be financing Al Safi Dairy, a Saudi Arabian dairy company. The dairy company is a joint venture between a European multinational and a massive group in the KSA. SAAB’s funding will be related to the company’s vast exports in the region and imports of feedstock.  

SABB’s new solution is based on a Murabaha structure and is their first venture into the inventory finance area. This move came right after the new SCF or sharia-compliant supply chain finance product that they launched in the closing half of 2021. Under this scheme, the bank has resolved to provide finances for the domestic suppliers of  Almunajem, Saudi Arabia’s food company.

With this off-balance sheet solution, clients can now improve their working capital and leverage their inventory assets. They can now participate in pricing and gather goods without putting the inventory on their balance sheets.

David Leslie, the general manager for receivable finance and global trade at SABB, said that the scheme is primarily for the big Saudi Arabian importers. They have to purchase on LCs or International Letters of Credit. These importers end up sitting on huge commodity inventories that block their cash.

Leslie says that their dairy client can let go of the LC with this new opportunity. Instead, they can leverage the new structure and improve their  feedstock inventory’s working capital. Their products will see higher demand as they resolve to just-in-case inventory instead of just-in-time inventory management.