A problem in the Saudi entrepreneurship ecosystem14 May 2014
Just like anywhere in the world, SMEs and startups represents the majority of commercial record registrations (CRs) in the Ministry of Commerce and Industry (MCI). In fact, they share more than 95% of these registrations! Which is a typical scenario in most other countries.
What does it mean?
This means we should have a lot of small and medium companies as well as businesses. Having such a high percentage also means a very high number of jobs available in different industries and sectors.
So where is the problem?
Such a healthy rate is not the problem by any means. The problem lies in the bureaucracy of different government entities in addition to strict rules & regulations. A simple example is when you apply for an interest-free loan from Saudi Credit & Savings Bank (SCSB) to start your business you have to have a permit from the municipality. That is not a problem but when you submit your request for a permit, they ask you to have a photo of your shop or store! How can I have a store up & running while I need the money first to set it up?! It is just like the chicken & eggs!
Same thing happens when you try to apply for the Human Resources & Development Fund (HRDF), it has so many rules and restrictions that makes your life, as an entrepreneur, just miserable. Instead of just focusing on your work, you have to figure out exactly what they need and pray that the representative, which you will hand the papers and documents to, was feeling good that day. One of the conditions to be legible for HRDF1 is to hire your employees on a permanent contract! This is B$! If I have a startup, it is absolutely doesn’t make any sense to have my employees sign permanent contracts. A lot of startups change their business models or plans in the first few years, DUH!
HRDF: they pay 2,000 S.R. ($533)/month to each Saudi employee as a contribution. Plus, they pay you 3,000 S.R. ($800)/month. In addition to all of that, if the employee managed to complete 1 year, he/she is legible to get 5,000 S.R. ($1,333) for a training course and if he/she managed to complete 2 years, he/she is legible for 10,000 S.R. ($2,666) for training. ↩