and manufacturing industries with 14. 6 percent. small enterprises employing less than five persons have accounted for the bulk share, representing 45. 5 percent of total enterprises at the end of 1430ah, enterprises with 5 – 59 employees constitute 42 percent, while the remaining 3. 8 percent has been accounted for by enterprises with more than 60 employees. these data show that most enterprises in saudi arabia are small ones, based on the number of employees. the sme ’ s contribution to total gdp is low. the share of private sector gross product, which smes are part of, is 33 percent, while the share of smes in gdp is 57 percent in japan, 64. 3 percent in spain, 56 percent in france, 44 percent in austria, 43 percent in canada, 33 percent in australia and more than 50 percent in the united states. the sme ’ s modest contribution to gdp in saudi arabia could be ascribed to the immensity of the oil and public sectors, being the main catalyst for economic activity. smes coverage in the national income accounts might be low. dear audience, small and medium enterprises are facing clear challenges to obtain the necessary funding to meet their expansion needs because of several reasons ; one of which is the lack of guarantees for granting credit. to overcome this problem in the kingdom, the ministry of finance, in cooperation with saudi banks, has established “ kafalah program ” for financing small and medium enterprises. it is a program administered by the saudi industrial development fund with a capital of rls 200 million to cover a proportion of the risk of the funding entity in case the guaranteed enterprise fails to repay the finance or part thereof, and to encourage banks to finance viable small and medium enterprises, which cannot provide the necessary guarantees or accounting records that prove their eligibility for funding. the program has been performing well since its inception in 2006 up to the end of 2010. the number of guarantees approved during the period amounted to 1, 668 with a total value of rls 644 million against loans to the tune of rls1. 6 billion granted by banks under the umbrella of the program, which benefited about 1, 113 small and medium enterprises. this is in addition to loans provided by the saudi credit and savings bank, for financing young people and small enterprises, as well as the centennial fund, and abdul latif jameel ’ s “ finance program ” that provides material support for youth ’ s projects and training courses. dear audience, in conclusion, i wish

rules are still evolving in certain areas based on the results of quantitative impact studies and thus may require further adjustments in the current regulatory requirements ; lastly, and the most important step to be taken by banks, is adopting the robust governance structure that best suits their business model and risk profile. the board of directors should have a clear understanding of their role in corporate governance and be able to exercise sound and objective judgment about the affairs of the bank. the senior management should ensure that the bank ’ s activities are consistent with the business strategy, risk tolerance / appetite and policies approved by the board. this is the cornerstone on which any effective risk management framework, sound incentive structure and robust governance arrangements must be built. in order to give you our perspective of implementing basel iii, i would point out that our banking control law ( bcl ) already provides for a clear definition of capital and also provides for legal capital, liquidity and leverage ratios and limits on large exposures. the bcl also allows sama to introduce appropriate and relevant international standards such as those emanating from the basel committee or the financial stability board. over the years, sama has proactively introduced international standards and best practices in saudi arabia to ensure that the saudi banks are well managed, adequately capitalized and effectively governed. this is also reflected in the safety and soundness of individual banks and the resilience of the overall banking system. in line with its stance, sama was among the first group of non basel countries at that time to introduce basel i framework in 1992 and the basel ii in january 2008. while basel i was crucial for the introduction of the concepts of risk sensitivity of banks ’ assets and tier - 1 and tier 2 capital, basel ii introduced us to the concepts of internal risk rating systems and risk modeling. from sama perspective the greatest value in introducing basel ii was the significant progress that banks have made in four areas. firstly, with the introduction of the internal capital adequacy assessment plan ( icaap ), they have improved their capital planning process. icaap requires banks to align their business plans with their risk appetite and risk profiles in projecting their capital over the medium term. the second area of improvement is on other pillar 2 risks including interest rate, liquidity, fx, strategic, technology and reputation. all banks have developed methodologies to identify, quantify, manage and allocate capital to such risks. these were risks for which no capital was required earlier. a third area is