The role of financial intermediaries in Saudi Arabia’s development with particular reference to the national commercial bank

Abstract

The purpose of this thesis is to examine the role of financial intermediaries in Saudi Arabia’s development with particular reference to the experience of the National Commercial Bank, the oldest bank in the Kingdom and the largest in the Middle East. The objective of the work was to reveal to what extent financial intermediation was involved in the development process of Saudi Arabia? Were commercial banks a prerequisite for development or was their growth a consequence of it? Was the development financed through Saudi Arabian financial intermediaries or was it funded from elsewhere, namely, revenues from crude oil disbursed through government spending? As a result, was the financial system permitted to deepen its financing or merely widen its activities? Was the Saudi Arabian government's role in development so great that commercial banks experienced crowding out? These issues were explored by examining the overall position of the commercial banks, and the National Commercial Bank in particular. The case study of the National Commercial Bank's financial statements and financial ratios over a period of two decades revealed its unfolding role within the economy. An investigation was made of the competitive position of the National Commercial Bank vis-a-vis other banks, and the fluctuations in its market share of deposits and loans was assessed. Finally, interviews and surveys revealed the bank's new managerial strategies and its plans for future business development to serve the needs of its clients. It was found that the liberalisation of the Saudi Arabian financial system had contributed to the Kingdom's economic development, and resulted in changes in institutions such as the National Commercial Bank which meant they could play an increasing role in the funding of industrialisation.