RIYADH: Loans by Saudi Arabia’s banking sector increased to SR2.72 trillion ($726.44 billion) in May, marking an annual 11.14 percent rise, official data showed. Data released by the Saudi Central Bank, also known as SAMA, showed that corporate credit, which accounted for 53 percent of the total lending in the month, experienced higher growth rates compared to personal loans, which made up the remaining 47 percent. McKinsey also noted in a June report that mortgage lending is a leading growth factor in banking sector expansion in the Kingdom, despite high interest rates. This comes as high oil prices, the government’s economic diversification efforts, increased government spending, and robust non-oil gross domestic product growth are creating substantial growth opportunities for Saudi banks, according to Fitch Ratings. Gulf Cooperation Council governments are promoting homeownership and enhancing residential finance as part of a broader trend aimed at developing mortgage markets, impacting regional banks’ retail loan portfolios. Globally, banking growth is driven by digital payments and fintech innovations, with artificial intelligence poised to revolutionize banking and asset management in advanced economies, the firm added. Personal loans, encompassing all types of credit extended to individuals, totaled SR1.29 trillion, marking a 7.3 percent growth year on year, the SAMA report noted. Among corporate loans, those granted for real estate activities comprised the majority, accounting for 20 percent of the total and amounting to SR281.1 billion. This category saw a 24 percent annual increase. Closely following were loans extended for wholesale and retail trade, comprising 14 percent of corporate holdings and totaling SR196.61 billion. This category of claims saw an 11.64 percent rise from May 2023. Lending for manufacturing activities constituted a 12 percent share totaling SR170.81 billion, reflecting a 2.43 percent decline compared to the same month last year. Meanwhile, the electricity, gas, and water supply sectors accounted for 11 percent of lending, growing by 30 percent during this period. In May, the Saudi Electricity Co. announced a SR472 billion capital expenditure program over six years. This initiative aims to enhance the Kingdom’s power generation, transmission, and distribution infrastructure to meet future demand growth. The transmission sector will receive the largest investment of SR351 billion. In June, Saudi Arabia also announced the world’s largest renewable energy survey, involving the installation of 1,200 measuring stations. Energy Minister Prince Abdulaziz Al-Saud launched the Geographic Survey Project for Renewable Energy, which aims to identify optimal sites for solar and wind power projects across the Kingdom. These initiatives will likely spur demand for financing across infrastructure development, power generation, and transmission projects. In terms of growth rates, lending for professional, scientific, and technical activities recorded the highest annual increase among others at 63 percent, despite comprising a relatively low percentage share of total loans at SR8.16 billion. This growth can be driven by increasing demand for specialized services such as consulting, engineering, information technology services, and research and development. Government policies and initiatives aimed at diversifying the economy and promoting sectors such as technology and innovation may also be driving increased demand in these fields. These efforts can include incentives for startups, technology parks, and research institutions.