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A Credit Policy sets clear rules for how a company handles lending, payment terms, and debt collection in Saudi Arabia. It guides decisions about who can get credit, how much they can borrow, and what happens if they don't pay. For banks and financial institutions, these policies must align with SAMA (Saudi Central Bank) regulations and Islamic finance principles.

Good credit policies protect businesses by managing risk and maintaining healthy cash flow. They spell out credit limits, required documentation, approval processes, and collection procedures. In the Kingdom, these policies typically include Shariah-compliant financing options and reflect local commercial laws, helping organizations make consistent, compliant credit decisions.

You need a Credit Policy when starting or expanding business operations that involve customer financing or payment terms in Saudi Arabia. This becomes essential when offering trade credit, setting up installment plans, or managing accounts receivable. It's particularly crucial for businesses transitioning from cash-only to credit-based transactions.

A Credit Policy proves vital during rapid growth phases, when dealing with new market segments, or when SAMA regulations change. Companies facing payment defaults, struggling with cash flow, or expanding into new regions across the Kingdom benefit from having clear credit guidelines. It helps prevent financial disputes and ensures Shariah compliance while protecting your business interests.

• Commercial Credit Policies: Set rules for B2B transactions, payment terms, and credit limits for business customers
• Retail Banking Policies: Guide consumer lending practices following SAMA regulations and Shariah principles
• Islamic Finance Policies: Focus on Murabaha, Ijara, and other Shariah-compliant financing structures
• Microfinance Policies: Designed for small business lending and entrepreneur support programs
• Corporate Banking Policies: Handle complex credit arrangements for large enterprises and government entities

• Financial Institutions: Banks and lending companies use Credit Policies to guide their lending decisions and ensure SAMA compliance
• Risk Management Teams: Develop and update policies based on market conditions and regulatory requirements
• Credit Officers: Apply policy guidelines daily when reviewing loan applications and setting credit limits
• Business Owners: Follow policy requirements when extending trade credit to customers or seeking financing
• Shariah Boards: Review and approve credit policies to ensure alignment with Islamic banking principles
• Legal Departments: Draft and modify policies to maintain compliance with Saudi commercial laws

• Business Assessment: Review your company's financial goals, risk tolerance, and current customer payment patterns
• Regulatory Research: Gather current SAMA guidelines and Shariah requirements for credit operations
• Market Analysis: Document typical payment terms in your industry and competitor credit practices
• Risk Parameters: Define credit limits, approval levels, and required customer documentation
• Collection Process: Outline steps for managing late payments and defaults
• Internal Review: Have finance, legal, and Shariah compliance teams validate the draft policy
• Documentation: Use our platform to generate a comprehensive, legally-sound Credit Policy template

• Policy Scope: Clear definition of covered transactions and applicable business units
• Credit Terms: Detailed payment periods, credit limits, and Shariah-compliant financing structures
• Assessment Criteria: Customer evaluation standards and required documentation
• Risk Controls: Credit approval levels and authority delegation matrix
• Collection Procedures: Steps for managing overdue accounts and enforcement measures
• Compliance Statement: Reference to SAMA regulations and Islamic banking principles
• Review Process: Policy update procedures and approval requirements
• Legal Framework: Governing law and dispute resolution mechanisms under Saudi jurisdiction

While both documents deal with credit management, a Credit Policy differs significantly from a Credit Agreement. The key distinctions center on their scope, purpose, and legal function in Saudi Arabia's financial landscape.

• Purpose and Scope: A Credit Policy provides organization-wide guidelines for managing credit operations, while a Credit Agreement is a specific contract between lender and borrower
• Legal Enforceability: Credit Policies are internal governance documents, whereas Credit Agreements are legally binding contracts enforceable under Saudi law
• Level of Detail: Policies outline general principles and procedures, while Agreements specify exact terms, payment schedules, and Shariah-compliant financing structures
• Flexibility: Credit Policies can be updated by management as needed, but Credit Agreements require mutual consent from all parties to modify
• Target Users: Policies guide staff decision-making, while Agreements bind specific parties in a financial transaction