Al-Muhafazah Education Company, a company listed on the Saudi Stock Exchange (Tadawul), announced the signing of an agreement to obtain an interest-free loan of SAR 3 million. This financing comes from Murooj Al-Hafar Medical Services Company, which is classified as a related party, in a move aimed at strengthening the company's financial position and supporting its operational plans.
According to the company's official disclosure on the Tadawul platform, the loan was granted without any interest or financial returns, making it a cost-effective financing option. Al-Muhafazah for Education committed to repaying the full amount in a single payment within a short period not exceeding four months and provided a promissory note as collateral, reflecting the mutual trust between the two parties.
General context and importance of the step
This funding comes at a time when the private education sector in Saudi Arabia is experiencing rapid growth, driven by the goals of Vision 2030, which places paramount importance on developing human capital and raising the quality of educational outcomes. Companies like Al-Muhafazah Education play a pivotal role in achieving these goals by expanding their educational services and developing their infrastructure to meet increasing demand.
Obtaining cash through interest-free loans from related parties is a common practice in the business environment, especially when the aim is to support core operational activities. This loan enables the company to finance and complete its ongoing projects on schedule, as well as meet its financial obligations to suppliers and employees, thus ensuring smooth business continuity and enhancing its competitiveness in the market.
Expected impact and corporate governance
Financially, this loan will improve the company's short-term cash flow management, allowing it greater flexibility in allocating resources to priority projects without incurring the burden of traditional financing costs. Strategically, this move reflects the support of the company's major shareholders and their confidence in its management and future plans.
It is worth noting that disclosing details of the relationship between the two parties is a crucial aspect of governance and transparency practices. The company clarified that “Murooj Al-Hafar” is considered a related party because the Chairman of the Board of Directors of “Al-Muhafaza for Education,” Mr. Abdullah Al-Muhaimid, is a director and partner in it, and board member Mr. Mohammed Saleh Al-Muhaimid is also a partner. This transparency is essential to reassure investors and other stakeholders that the transaction was conducted in a manner that serves the interests of the company and its shareholders.
