From its head-quarters in Riyadh and a network of offices spread across Saudi Arabia, SAMA manages the Kingdom's money supply and supervises its banking industry.

Anyone who has ever looked at Saudi Arabian paper money will have probably noticed the words "Saudi Arabian Monetary Agency" printed on the note, either in Arabic on one side or English on the other. Having seen the words, few give a second thought to their meaning or the vital service the agency performs in the Kingdom's fiscal well-being.

SAMA was established in 1952 in response to the need for the services of a sophisticated central bank that could supervise the monetary and fiscal functions of the growing nation and its budding banking industry. The history of money in modern Saudi Arabia dates back to 1924 when, having brought Makkah under his control, King Abdul Aziz Ibn Abdul Rahman Al-Saud issued the first copper qirsh coins, which circulated along with various other coins in the Hijaz. In 1928, King Abdul Aziz established a unified monetary system based on the Saudi riyal and, soon thereafter, the first coins bearing the name of the newly-unified Kingdom of Saudi Arabia were minted.

For years after the unification of the Kingdom, the silver and cupronickel coins, issued in a variety of riyal and qirsh denominations, were sufficient to meet the needs of the young nation. However, it was becoming increasingly difficult for the government and its agencies to handle large monetary transactions which were becoming the norm as the nation's oil income grew. The absence of paper currency began to become a major inconvenience as Saudi Arabia entered the 1950s with a variety of development and social programs that required large transactions.

The government, working with the International Monetary Fund (IMF), produced a program of reform in 1951 aimed at introducing a modern monetary system. That led to the establishment of SAMA the following year. As outlined in its original charter, SAMA is required to issue Saudi currency and take steps to stabilize and strengthen its value on the domestic and international markets, to centralize government receipts and payments, and to control and supervise the country's young banking system.

SAMA Governor Hamad Al-Sayyari at the Banking Technology Exhibition held in Riyadh in May.

Shortly after it was established, SAMA minted a Saudi gold coin equivalent to 40 riyals in value, which greatly facilitated government and commercial transactions. It then issued "pilgrim receipts," the Kingdom's first form of paper money, which was originally intended to relieve pilgrims to the Holy Mosque in Makkah of the necessity of carrying large bags of coins. The original ten-riyal receipts were widely welcomed, not only by pilgrims, but also by the business community, and subsequent versions were printed in ten-, five- and one-riyal denominations in the following years.

SAMA issues and circulates Saudi Arabian currency.

In 1960, SAMA introduced changes to the Saudi monetary system, making the riyal equal to 20 qirsh, rather than the 22 it was before, and dividing each qirsh into five halalahs, in effect placing Saudi currency on a decimal system that would greatly facilitate transactions. Following these steps, SAMA in 1961 accepted the IMF's recommendation to make the riyal a fully-convertible currency and undertook to place no restrictions on complete freedom of convertibility for the Saudi currency. Since then, the Saudi riyal has been one of the most solid and convertible currencies in the world and is currently 3.75 to the dollar.

One of the most important steps in SAMA's history also was taken in 1961 when the agency issued Saudi Arabia's first bank notes in denominations of 100, 50, ten, five and one riyals. The 500-riyal note, bearing on one side a likeness of the Holy Mosque and on the other the Holy Ka'abah along with King Abdul Aziz, was circulated in later issues and remains the largest note in use in Saudi Arabia.

Along with the business of issuing the currency notes and coins needed by the Kingdom, SAMA also monitors and controls the money supply. By following a stable policy in this respect, SAMA has supported the Kingdom's economic and financial growth of the past three decades.

Another of SAMA's important duties is to act as the government's fiscal agent, conducting all of its banking services, receiving revenues and disbursing payments. The agency also manages Saudi Arabia's foreign reserves in accordance with an investment policy emphasizing liquidity and stability. Furthermore, it is responsible for the purchase and sale of foreign exchange and the issuance of transfers and letters of credit.

The National Commercial Bank is the largest of Saudi Arabi's twelve(12) commercial banks.

For a nation which has the largest economy in the Middle East and one of the twenty largest in the world, these undertakings are a major responsibility that have to be carried out in a precise and rapid manner. SAMA conducts all these transactions from its headquarters in Riyadh and ten branch offices spread throughout the Kingdom.

Saudi Arabia's emphasis on development and commitment to realizing a growing role for the private sector in the national economy has granted SAMA another major responsibility, that of supervising the nation's banking system. When SAMA was established in 1952, there were no modern Saudi Arabian banks, while several foreign banks maintained branches in Riyadh and Jeddah.

SAMA soon took a series of steps to encourage the formation of commercial banks that could play a major role in the Kingdom's growth and development. It undertook studies to formulate policies to regulate and govern the activities of such banks and introduced the Banking Control Law, which was designed to help supervise banks as a means of preventing failure and to ensure sufficient liquidity to safeguard the interests of depositors and shareholders.

To encourage the formation of new banks, SAMA invested in such entities by making capital available to newly-formed institutions and purchasing shares in them. Another of SAMA's important steps in this regard was the establishment of joint-stock companies with the owners of foreign bank branches to form new commercial banks. Sixty percent of the shares of these new banks were required to be owned by Saudis, with the remaining 40 percent held by the joint-venture partner. SAMA also established a network of clearinghouses to facilitate the settlement of payments between commercial banks to support and extend their financial activities.

In addition to managing the nation's money supply, SAMA also is a repository for Saudi Arabian coins, both modern and historic.

Through these and other means, SAMA has helped in the formation of a vibrant commercial banking industry in Saudi Arabia. The Kingdom's 12 commercial banks have more than 1,000 branches throughout the country and have been actively supporting the nation's development by providing loans and other banking services to businesses and citizens. The fact that all 12 banks announced record profits last year is due, at least in part, to SAMA's unwavering support.

SAMA was also instrumental in establishing the Saudi Arabian Agricultural Bank, the Saudi Industrial Development Fund and the Saudi Credit Bank. These are institutions that provide long-term interest-free loans to Saudi citizens to help form new businesses and farms, as well as to build homes. These funds have provided tens of billions of dollars in soft loans that can be used to cover up to 50 percent of the cost of forming a new private venture, no matter how small or large. There are now thousands of factories, businesses, farms, commercial developments and private residences that owe their existence to such loans.

SAMA provides a range of information and advisory services to the government and the private sector. These include monetary reports, economic studies and annual reports, as well as conferences, banking symposiums and, at the grass-roots level, campaigns to make the general citizenry aware of the nation's banking services and instill in the public sound fiscal habits.

Through these and its many other efforts, SAMA has helped place Saudi Arabia on a sound financial footing and make the nation's banking system one of the most stable in the world today.



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