Special Report: Saudi Arabia - Sharia stocks attract indices

The problems come just as the wider economic downturn has forced banks to become more conservative about lending to companies than at any time this decade. In July, bank lending to local corporations was at a nine-year low.

This has put the brakes on many construction projects and has contributed to a shrinking of the kingdom’s non-oil economy.

Without funding, Saudi firms have little option but to delay or even cancel their investment plans – something that will disappoint Riyadh, given its bid to diversify Saudi Arabia’s economy away from its dependence on hydrocarbons.

So the news in September that the kingdom’s banks had reached a deal with Saad Group on the repayment of its debts is an important development. A similar deal with Algosaibi would add to the sense of optimism.

While on their own such deals will not trigger a resurgence in the country’s economy, it will bring a difficult period for the banks to an end, and allow them at least to think about reviving lending to other private companies.