The Saudi Industrial Development Fund, a government lender with $5.3 billion (Dh19.4bn) in capital, said demand has increased this year from companies seeking project finance as the global credit crisis constrains bank lending.
"This year we will have more in terms of the number of loans but not the amounts," Mohammed Dobaib, acting director general of the Riyadh-based fund, said in an interview.
"Some successful traders used to go to banks without coming to us. Now, it is different. The banks are being more conservative."
Saudi companies, such as National Shipping and National Agriculture Development, have sought government loans as private-segment bank lending tightened in the Arab World's largest economy.
Riyadh-based National Shipping agreed in April to a SR1.05 billion (Dh1bn) Islamic loan with the Saudi Public Investment Fund as the operator of oil and chemical tankers expands its fleet.
Saudi businesses expect bank lending to "remain anaemic" through the rest of the year even after the Saudi Arabia Monetary Agency undertook measures to improve liquidity, Saudi British Bank said in its Business Confidence Index.
The Saudi Industrial Fund provides loans that will cover 50 per cent of the cost of projects located in the world's largest oil exporter. The fund lends as much as SR600 million for joint ventures with a maximum repayment period of 15 years.
The total value of lending this year will fall from the SR8.8bn in 2008 as major petrochemical projects are either halted or delayed, Dobaib said.
"Last year was an exception because we had so many huge projects in petrochemicals, steel and cement," Dobaib said.
"This year they are slowing down and waiting to see. Maybe, they will expand in 2010 and 2011." The fund provided 32 loans, or 30 per cent of the total number of loans approved last year, for chemical projects, according to the fund's 2008 annual report. The financing helped build plants in Jubail and Yanbu.
International companies have also approached the Saudi Industrial Development Fund for project financing as they seek new business opportunities in the Kingdom. Saudi Arabia plans to spend $400bn in the next five years to stimulate the economy.
"Outside of Saudi Arabia, the liquidity crisis is affecting many investors so they are coming to Saudi Arabia," Dobaib said.
"Last year, or two years ago, they would not have decided on Saudi Arabia. Now, they are fighting to come here because we have liquidity."
Analysts said foreign investors are set to stay bullish on Saudi Arabia despite the opaque nature of the Kingdom's markets as opportunities from a buoyant crude price and infrastructure spending outweigh regulatory risk.
But analysts said the case of unlisted Saad Group, which credit agencies stopped covering due to a lack of information, underline the need for stricter regulation.
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