Banking Behaviour in an Arabian Gulf Country: A Consumer Survey

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The origins of commercial banking in Saudi Arabia can be traced to the opening of a branch of the Netherlands Trading Society in 1927 in the port of Jeddah, mainly for the benefit of the pilgrims from Indonesia, then a Dutch colony. Development of a domestic banking system in Saudi Arabia, however, has a relatively recent history. In fact, it was not until the 1950s that local commercial banks (National Commercial Bank and Riyadh Bank) were established in the Kingdom. The pace of banking activity and bank holdings were low until the mid 1970s (Habib et al., 1987). Two events during that time significantly affected the Saudi banking scene. One was the 1973 oil boom which resulted in an explosion of financial transactions and required a comprehensive array of banking services. The second was the government’s programme of Saudisation which required all foreign-owned banks to convert to joint-stock companies with majority ownership transferring to Saudi nationals. The Saudisation process made branch expansion and capital increases possible for the banks.