Blown billions, Part II
Banks in the Gulf and beyond are reeling from Saudi Arabia’s Saad and al-Gosaibi scandal. We look at the web of relationships behind a dispute that will change the way business is done in the region, reports Trend magazine. Part II
October 17, 2009 9:27 by Ehtesham Shahid
In Saudi Arabia, banks have built an entire business model on name lending. “When you go to a name like al-Gosaibi, it suggests that he is powerful, has been in the business for a long time and has a lot of credibility,” says one Riyadh-based banker. “So banks feel comfortable lending, going by the track record.”
But the landscape is changing. Companies in the region are moving to the second and third generation of owners, where the founders are no longer around and personal relationships no longer have the pull they once did.
Firms will have to open up, allowing banks to perform proper risk assessments. Family businesses will need to streamline and fine-tune, a process that is likely to include learning uncomfortable truths about whose hands are in the till. In the meantime, it’s likely we haven’t heard the last of the colorful Maan al-Sanea.