Saudi Arabia’s debt capital market still has growth potential, investment minister says

RIYADH: Saudi Arabia is advancing an ambitious strategy to position itself as a global hub for technology startups, striking a balance between regulatory reform and an unprecedented wave of innovation.   

As the Kingdom races to diversify its economy and reduce dependence on oil, entrepreneurs and legal experts say the country is reaching a pivotal moment in its efforts to create a business environment that is both competitive and predictable. 

Feras Mousilli, managing partner at Lloyd & Mousilli, described the pace of change as remarkable.   

“The regulatory landscape in Saudi Arabia is evolving at an impressive pace and the government’s proposed regulations show a clear intent to support its Vision 2030 goals: reduce barriers, increase clarity, and compete globally for tech innovation,” he told Arab News in an interview.   

Yet as new frameworks take hold, founders continue to grapple with the friction that arises when rapid innovation meets complex compliance requirements. 

In recent years, the Saudi Central Bank and the Capital Market Authority have emerged as key architects of this transformation.

Through sandbox environments and tiered licensing, regulators have created mechanisms for startups to test their ideas with fewer constraints.   

Among the most consequential reforms is the introduction of open banking frameworks, which mandate financial institutions to share Application Programming Interfaces with third-party fintech firms, opening the door to greater competition and inclusion. 

APIs are a set of rules and protocols that allow different software systems to communicate and exchange data. 

For founders such as Hisham Al-Falih, the shift has been both sweeping and hard-won.   

“I’d say that the things that have kind of maybe changed the most this year are the introduction of new regulations,” said Al-Falih, founder of Lean Technologies, in an interview with Arab News. 

“In Saudi Arabia, the central bank has been continuing its mission and its plan of rolling out open banking,” he added. 

“This is obviously a multiyear effort, and it’s culminating now with the introduction of the PIS, the Payments Initiation Service, which is expected to go live soon,” Al-Falih said. 

He recalled that when Lean Technologies launched in 2019, few policymakers had a roadmap for modern fintech.   

“None of these regulatory kind of bodies really adopted open banking and had plans for it,” he said.   

“And so there’ve been years of discussions and conversations and back and forth with a variety of industry bodies to get to where we’re getting to today.” He added that Lean has worked closely with regulators to help shape the emerging framework. 

Beyond fintech, the Kingdom has implemented comprehensive reforms to the legal framework governing all businesses.   

In February, the government passed a new Investment Law establishing a unified framework for foreign and domestic investors, with enhanced protections and simplified procedures.   

At the same time, a revised Companies Law introduced the Simple Joint Stock Co., designed to make it easier to incorporate and operate a startup. 

Companies were required to update their Articles of Association by Jan. 18, marking a nationwide effort to align corporate governance with international norms. 

These changes coincide with record-breaking momentum in the broader startup ecosystem. 

In 2025, Saudi Arabia was recognized as the fastest-growing startup environment in the world, according to the Global Startup Ecosystem Index, which reported Riyadh had climbed 60 places to rank 23rd globally.   

Venture funding has accelerated sharply, achieving a 49 percent compound annual growth rate from 2020 through 2024, with artificial intelligence startups emerging as a priority.   

Riyadh’s growth was catalyzed by a policy-driven approach that prioritized both scale and specialization.   

According to the 2025 Global Startup Ecosystem Report by Startup Genome, more than 200 fintech companies now operate in the Kingdom, supported by the Saudi Central Bank’s regulatory sandbox and Fintech Saudi’s market-building efforts.   

The report highlighted startups such as Lean Technologies, Rasan, and Tamara as examples of companies attracting substantial regional and international capital, with major financial institutions serving as early adopters and anchor clients. 

In addition to fintech, the report praised the Kingdom’s progress in cybersecurity, noting that Riyadh-based firms like Mozn and sirar by stc are developing artificial intelligence-powered solutions for identity verification, fraud detection, and compliance. 

Saudi Arabia has emerged as the leading hub for venture capital activity in the Middle East and North Africa, raising $860 million in the first half of the year — a 116 percent year-on-year increase — supported by sovereign initiatives and rising foreign investor interest.  

According to regional venture platform MAGNiTT, the Kingdom recorded 114 VC deals during the period, representing a 31 percent increase from the same time in 2024, and continuing its momentum from the previous year, when it secured the largest volume of funding in the region for the second consecutive year.  

This surge in venture activity is further underpinned by structural reforms and policy incentives.  

As of mid-2025, Saudi Arabia’s Ministry of Investment had issued 550 Startup Investment Registrations, known as Riyadi licenses, reflecting a 118 percent annual growth.   

While Saudi Arabia’s ambition to become a digital-first economy is undisputed, Mousilli cautioned that rapid change can overwhelm young companies.   

“The challenge comes when compliance is so burdensome or complex that it diverts resources away from core growth,” he said.   

“For example, in fintech, a startup may spend months navigating licensing or anti-money laundering requirements — before they’ve even validated their product-market fit.”   

As a result, he noted, some founders default to “we’ll deal with it later,” exposing themselves to legal risk. 

The Kingdom has signaled that it wants to avoid this trap. Regulators are increasingly adopting risk-based supervision models that calibrate oversight according to the size and systemic impact of each company.   

“The most effective regulators understand that a small startup doesn’t need the same oversight as a multinational bank,” Mousilli said. “Saudi Arabia is beginning to adopt this risk-based approach, which is a positive sign.” 

To complement the regulatory overhaul, the government has introduced new compliance mandates around ultimate beneficial ownership disclosures, enhanced anti-money laundering protocols, and environmental, social, and governance reporting, reinforcing transparency and investor confidence.   

The Digital Government Authority reported that digital transformation readiness exceeded 74 percent in 2025, underscoring a push to digitize public services and reduce administrative delays. 

For founders, this shift is not merely regulatory — it is cultural. Al-Falih said that collaborative policymaking has become a defining characteristic of the Saudi tech sector.   

“We’ve been working closely with the Central Bank and the associated parties in the ecosystem to provide our feedback, our notes on how their framework is being written, and to obviously engage with them in a productive way,” he said. 

In the view of many entrepreneurs, these conditions are creating fertile ground for growth. “I would argue that the region has some of the best regulations and infrastructure set up,” Al-Falih said. “And so we will be one of the more successful parts of the world to introduce these technologies.” 

Still, legal experts caution that unresolved issues — such as the enforcement of intellectual property rights, clarity in employment law, and the efficiency of dispute resolution — remain on investors’ radar.   

Mousilli observed that, despite the progress, Saudi Arabia will need to maintain its momentum to consolidate its gains. “The frameworks are improving, but clarity and consistency, especially in implementation, remain key areas to watch and develop,” he said. 

Yet for those building the next generation of technology companies, the convergence of regulatory ambition and economic transformation is unmistakable.   

As Al-Falih put it: “This is one of the best times to be alive and one of the best times to be a member of the tech community in the GCC.”