Saudi businessmen's defaulting debts to local banks are estimated at 150 billion Saudi riyals ($40 billion), Saudi-based Al-Riyadh daily reported on Saturday citing economists who blamed flawed lending procedures and the kingdom's central bank for the problem.
The banks' lending to these businessmen was based on the businessmen's "reputation" and this is a point of weakness, economist Khalid al-Humaidan told the paper.
About 70 percent of the banks' employees dealing with lending operations are foreign expatriates whose first concern is to achieve the highest volume of lending regardless of the creditworthiness of the loan seekers, Humaidan added.
The Saudi Arabian Monetary Agency, the country's central bank, has turned a blind eye to loans in billions of riyals by some banks to real estate projects although these banks are not licensed to finance the real estate sector, Humaidan said, according to the daily.