Tassnief’s Rating Opinion
Simah Rating Agency (Tassnief) has assigned initial long-term entity rating of “A-” (Single A Minus) and short-term entity rating of “T-3” of Tamara Finance Company. The outlook on the rating is “Stable”.
About the Company:
Tamara Finance Company, referred to as “Tamara” or “the Company” is a Closed Joint Stock Company registered in the Kingdom of Saudi Arabia under the commercial registration number 1010627663 dated February 18, 2020. The legal status changed from a sole shareholder foreign limited liability company on September 10, 2024. Tamara is authorized by the Saudi Central Bank (SAMA) to provide finance services and consumer financing. The principal activities include origination and servicing of consumer receivables via instalments across its merchant network across the Kingdom. The head office is in Riyadh.
Rating Rationale
The ratings assigned to Tamara consider its strong market position in the Saudi Fintech sector and rapid growth in operating scale, underpinned by a robust digital platform, consistently expanding merchant network and consumer base. The comfort is also drawn from satisfactory business diversity in terms of top-merchant concentration, growing product portfolio, and geographic presence.
The ratings also incorporate sound asset quality indicators, sizeable provisioning coverage, and strong recovery practices, while expectations of credit risk emanating from performing portfolio are also supported by portfolio’s concentration with borrowers having low debt-burden ratios and above average credit scores. Profitability has improved materially following scale-up and increasing contribution from profit-bearing products. Liquidity is considered manageable, supported by cash balances and committed funding although compared less favorably to local commercial banks, which is an expected structural difference as banks enjoy large retail and granular deposit base. However, elevated leverage remains a key rating constraint due to asset-backed debt funded growth strategy and limited historical internal capital generation. Tassnief expects capitalization indicators to strengthen over the rating horizon with improvement in internal capital generation. The ratings also reflect satisfactory governance framework and efficient risk management practices.
Rating Triggers
The ratings are dependent on achieving growth targets in operating scale and loan portfolio, while maintaining asset-quality indicators as the Company expands its longer-tenor financing portfolio, which is projected to become one of the largest growth drivers. The ratings are also dependent on sustaining profitable growth, strengthening the equity base through internal capital generation and earnings retention, and reducing leverage indicators as the Sharia-compliant finance portfolio scales, emergence of funding constraints, and continued elevated indicators could negatively impact the ratings.
