Introduction

Saudi Arabia’s transformation represents one of the most compelling narratives of the twenty-first century. Under Crown Prince Mohammed bin Salman’s leadership, and while parts of the Middle East continue to face challenges, Saudi Arabia is leveraging its stability and resources to drive regional progress through economic development, technological innovation, and social reform.

The nation’s journey from a traditional oil-dependent economy to a diversified, modern state demonstrates the potential for sustainable development in the region. Through Vision 2030Footnote ¹ the country is implementing extensive reforms in business, tourism, entertainment, and social policies while maintaining its commitment to regional stability and prosperity.

This transformation includes creating high-quality jobs, promoting gender equality, developing smart infrastructure, and fostering international partnerships. Saudi Arabia’s strategic location and economic strength position it as a key player in global cooperation as it seeks to share the benefits of growth with neighboring countries through investment, development finance, and regional connectivity initiatives. While the dichotomy of delivering sustainable development outcomes, amid numerous regional crises, is challenging to comprehend, the unique resilience of the Saudi people, rooted in history and a culture of scarcity, has proven a critical success factor.

Indeed, the Arab world has shown remarkable resilience over the past few decades despite multiple global challenges. According to the International Monetary Fund (IMF) the Middle East and North Africa (MENA) represent 3.64 percent of world’s gross domestic product (GDP) and were projected to grow by 4.2 percent in 2025.Footnote ² The region’s significance, however, extends beyond economics. MENA is home to 5.9 percent of the world’s populationFootnote ³ and 1.6 percent of the global workforce.Footnote ⁴ Positioned at the crossroads of Asia and Africa, it is well placed to benefit from the synergies and dynamics of these two continents that are set to shape the global economy of the future.

Saudi Arabians take great pride in their strong value system, where generosity and charity are deeply ingrained. However, a key challenge lies in transitioning from traditional forms of giving to more institutionalized and strategic approaches that can drive systemic and sustainable development locally, regionally, and globally. Therein, the nonprofit sector directly reflects Saudi society’s evolution and growth embodying a sentiment of hope and prosperity. Indeed, the latest trends in the Saudi nonprofit sector showcase the potential for not only advancing more impactful forms of giving in the region but also catalyzing the creation of a $26.7-billion economy.Footnote ⁵

This chapter examines the transformative potential of Saudi Arabia’s evolving third sector, emphasizing recent regulatory reforms that have opened new avenues for nonprofit organizations (NPOs). These reforms position NPOs as essential partners in advancing the Kingdom’s long-term Vision 2030 goals.

Catalytic Capital for the Global South

Before examining the opportunities for philanthropy in Saudi Arabia, it is essential to assess the potential of catalytic capital in the Global South. Unsurprisingly, the world is struggling to meet the UN 2030 Sustainable Development Agenda, with Impact Europe reporting that only 17 percent of the sustainable development goals (SDGs) are on track.Footnote ⁶ Meanwhile, climate change experts at the IPCC note that while there is still a window for addressing the global crisis, it is “rapidly closing.”Footnote ⁷

Many countries in the Global South are trapped in debt cycles, limiting their fiscal space to address national development targets. Today, nations face tight fiscal constraints and a heightened risk of debt distress, with the median debt service burden for least-developed countries (LDCs) rising from 3.1 percent of revenue in 2010 to 12 percent in 2023 – the highest level since 2000.Footnote ⁸ Alarmingly, four in ten people worldwide live in countries where governments spend more on interest payments than on education or health.

Private-sector development, a key driver of sustainable growth, has stalled as investments, trade, and technology diffusion in recent years. Structural changes pose new challenges for countries’ productive integration into the world economy, necessitating a search for new growth and development strategies. While financial inclusion is a bright spot, financial and capital markets remain underdeveloped in many developing countries, with financial volatility contributing to the dearth of long-term investment.Footnote ⁹

Challenging the West-Centric Global Development Agenda

The idea of catalytic capital is being promoted as an essential tool to tackle the financing challenges to achieve the SDGs. While funding is essential, more structural challenges need to be addressed to unlock the full potential of reaching the global development agenda before it becomes too late. The Global South is particularly well positioned to demonstrate new levels of local innovation and challenge the historical Western-centric solutions to complex global developmental challenges.

Moreover, against this backdrop, Global South countries can alter the global development agenda when given the opportunity. During the Saudi G20 presidency in 2020, Saudi Arabia proposed structural solutions to address Global South challenges. Notably, this comprised leveraging its leadership position to push for the Debt Service Suspension Initiative (DSSI), which allowed around forty-eight out of the seventy-three eligible countries to seek DSSI relief and receive US$12.9 billion of debt service suspension granted mainly by bilateral official lenders.

Providing more opportunities for Global South countries to lead global economic platforms such as the G20 is critical. By implementing essential structural reforms to the international financial architecture – originally designed eighty years ago by forty-four predominantly Western countries to serve their own growth – new parameters and ambitions can be established to drive inclusive global development.

The Arab world is a diverse and complex region often marked by a dual narrative of turmoil and progress. While instability and crisis have frequently defined its story, the region has also seen successful socioeconomic advancements, with key players investing in aid, relief, and diplomacy to mitigate conflict. This juxtaposition of disaster and prosperity challenges external observers’ understanding of the region. Resilience has been the unifying thread, whether in overcoming adversity or capitalizing on prosperity.

For more prosperous nations, there is a growing recognition that regional stability hinges on ending conflict and sharing the benefits of growth. Resource mobilization, development finance, aid, regional connectivity, South–South cooperation, and global advocacy are crucial in offsetting regional conflicts and fostering a sustainable future. Therein Saudi Arabia can play a very significant and unique role in designing and securing a new future for the region, notably by encouraging the growth of the impact sector and ensuring that it thrives in a conducive regulatory framework.

Regulatory Reform for Sector Resilience: The Case of Saudi Arabia

Since the launch of Saudi Vision 2030 and its ambitious development agenda in 2017, Saudi Arabia’s nonprofit sector has experienced unprecedented growth and impact. For the first time, the impact sector – including NPOs and other third-sector entities – is recognized as a key development partner, with a dedicated goal of contributing 5 percent to the national GDP by 2030.

While this may seem ambitious, the sector has already witnessed remarkable growth in just seven years, expanding from 4,000 entities to over 62,000 NPOs by the end of 2024. This dramatic surge reflects increasing trust in NPOs and a growing societal commitment to giving and volunteering. It also serves as a powerful testament to hope and the resilient spirit of Saudi society.

King Khalid Foundation’s (KKF) latest research reveals that by 2023, the Saudi NPO sector had already surpassed the Vision 2030 target of $26.7 billion in economic contribution, accounting for 3.3 percent of GDP. If current trends continue, the sector is on track to achieve its Vision 2030 goal of a 5 percent GDP contribution by 2028 – two years ahead of schedule. Additionally, the sector has already met its Vision 2030 volunteering target of 1 million active volunteers six years early. These achievements strongly position Saudi Arabia as the host of the region’s largest philanthropic and nonprofit ecosystem.

KKF research further highlights the sector’s dynamism and substantial growth, with key trends shaping its economic and social impact. Educational and research-focused NPOs generated the highest revenues, totaling SAR 19 billion, reflecting strong demand for knowledge-driven initiatives. Meanwhile, health-focused NPOs recorded the highest expenditure at $4 billion, emphasizing the critical role of health care–driven philanthropy in the Kingdom’s development landscape.

Social service and cultural NPOs emerged as the largest employers, underscoring their expansive role in community engagement and job creation. In contrast, environmental NPOs and philanthropic intermediaries ranked as the smallest categories, indicating areas where further investment and policy incentives could drive future expansion.

A notable shift in funding sources has reshaped the sector’s financial landscape. Government grants accounted for 11 percent of charities’ revenues, supported by the Charities Support Fund, which disbursed $130 million in grants to NPOs. However, reliance on government funding has steadily declined – from 27 percent of total revenues in 2016 to 13 percent in 2021 and 11 percent in 2022. This shift reflects a strategic transition toward financial sustainability as private donations, investments, and alternative income sources increasingly constitute the dominant revenue streams for the sector. This evolving financial model not only enhances the resilience of Saudi Arabia’s third sector but also aligns with Vision 2030’s broader objective of fostering a more independent and self-sustaining nonprofit ecosystem.

Indeed, domestic regulatory reforms are playing a key role in building a diversity of income sources for NPOs while fortifying the overall resilience of the sector. For example, the Charities and Organizations Law has introduced updated regulations for implementation, aligning with the General Authority for Awqaf and the National Centre for the Non-Profit Sector. This regulatory reform, along with increased sectoral cohesion, has facilitated the emergence of new actors, driving the sector’s expansion.

Global Regulatory Challenges: Sector Advocacy

International regulations have posed significant challenges to the development of the nonprofit sector, particularly in financial accessibility and operational sustainability. While restrictions on NPOs in the region are often attributed to government oversight, a major driver of these constraints stems from global regulatory frameworks established by financial standard-setting bodies.

One of the most influential regulatory bodies shaping the financial landscape for nonprofits is the Financial Action Task Force (FATF), which classifies nonprofits as high-risk entities vulnerable to money laundering and terror financing. In response, central banks and financial institutions worldwide have implemented stringent compliance measures, including enhanced due diligence, transaction monitoring, and, in many cases, outright de-risking. These regulations have led to the widespread financial exclusion of nonprofits, humanitarian organizations, and philanthropic intermediaries – limiting access to essential banking services, delaying international fund transfers, and increasing administrative burdens.

The unintended consequences of such regulatory constraints are profound. Many nonprofits struggle with financial sustainability due to restricted access to formal banking systems, forcing them to rely on informal channels that, ironically, pose even greater security risks. Additionally, the lack of financial inclusivity hampers cross-border humanitarian efforts, delaying crisis response and obstructing the flow of philanthropic capital to regions that need it most.

To counter these systemic challenges, King Khalid Foundation has played an active role in advocating for a more balanced approach to financial regulation. Engaging with civil society organizations through platforms such as the Civil 20 (C20), the G20, the Global Partnership for Financial Inclusion (GPFI), and FATF dialogues, KKF has pushed for reforms that differentiate between high-risk and low-risk NPO activities, ensuring that essential charitable work is not unduly restricted.

A risk-based approach is at the core of these advocacy efforts, urging financial institutions to support legitimate nonprofit activities while maintaining safeguards against illicit financial flows. By fostering greater collaboration between regulatory bodies, banks, and the nonprofit sector, KKF aims to create an enabling environment where philanthropy and social impact initiatives can flourish without unnecessary financial roadblocks. In parallel, dialogue with the Saudi Central Bank (SAMA) has led to the easing of key restrictions, including lifting bans on banking cards and online transactions for nonprofits – critical steps in mitigating the impact of global anti–money laundering standards on the sector. Additionally, in 2022, Saudi Arabia enacted a comprehensive fundraising law, organizing and structuring donations to enhance financial transparency and accountability.

Establishing Enabling Institutions to Facilitate Sector Development

Beyond advocacy, significant strides have been made in improving the sector’s financial oversight and operational transparency. The 2021 establishment of Saudi Arabia’s National Center for Non-Profit Sector (NCNPS), modeled after the UK Charities Commission, has centralized governance, streamlined regulations, and strengthened trust in the sector. The emergence of digital crowdfunding donation platforms has further revolutionized the sector, unlocking the power of retail philanthropy. These platforms have enabled giving, making philanthropy more accessible and equitable for all. By 2024, digital donation platforms generated $4 billion in donations, with Ehsan, the country’s leading crowdfunding platform, playing a pivotal role.

A remarkable shift in donor demographics is also evident. Most donations now come from small individual donors contributing amounts as little as $.27–$27, whereas major philanthropists (contributing $27,000 or more) accounted for 26 percent of total donations. This shift signals a decentralization of philanthropic influence, ensuring that even small NGOs in rural and underserved areas have an equal opportunity to receive funding through online platforms.

The introduction of Waqf investment funds has modernized endowment management in Saudi Arabia. The General Authority for Awqaf (GAA) has enhanced oversight of the Kingdom’s vast endowment sector, which includes some of the world’s most historic Awqaf. Estimates suggest that Saudi Awqaf are worth more than $120 billion.Footnote ¹⁰

In the first half of 2024, the GAA conducted more than 5,900 oversight operations to ensure compliance with donors’ conditions, enhance governance, and maximize the impact of endowments on economic and social development. Additionally, it signed twenty-three agreements and memorandums of understanding with various government entities and endowment organizations, totaling more than $1.07 billion. These measures underscore the GAA’s commitment to strengthening the governance and sustainability of Saudi Arabia’s endowment sector, ensuring that these assets continue to play a vital role in the country’s economic and social development.

By the end of 2024, Awqaf investment funds had reached more than $453 million in assets under management, paving the way for future financial sustainability in the sector. KKF estimates that once assets reach $26.7 billion, forecasted by 2040, it will meaningfully reshape the revenue mix, provided the current growth momentum continues. Endowment investment funds have the potential to transform the sector’s financial sustainability for decades to come. These developments reflect a significant shift from traditional real estate holdings to diversified financial investments, generating sustainable income for NPOs and contributing to the broader economic and social objectives of Saudi Arabia.

Saudi Arabia has also introduced several regulatory changes to strengthen Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) frameworks, aligning them with Vision 2030 objectives. In 2017, the Capital Market Authority (CMA) implemented new corporate governance regulations aimed at enhancing shareholder rights and board accountability, ensuring companies adhere to global best practices in governance and sustainability.Footnote ¹¹

To further promote transparency, in 2021, the Saudi Exchange (Tadawul) issued ESG disclosure guidelines, encouraging publicly listed companies to integrate sustainability factors into their operational and financial reporting.Footnote ¹² While early ESG efforts in Saudi Arabia focused primarily on environmental and governance aspects, there is a growing emphasis on the social component, encouraging businesses to integrate community well-being into their core strategies rather than treating CSR initiatives as mere marketing tools. These reforms reflect the kingdom’s commitment to fostering a business environment where CSR and ESG principles are deeply embedded, ensuring that corporate growth aligns with social responsibility and sustainable development.

Building Collaborative Frameworks

The 2022 Companies Law has introduced provisions permitting the establishment of nonprofit corporations, thereby diversifying opportunities for philanthropy in Saudi Arabia. This regulatory change has led to a significant increase in the formation of nonprofit companies, which have become a prominent type of NPO in the sector. This trend reflects a shift from traditional grant-making toward impact investing within the Saudi nonprofit landscape.Footnote ¹³

Another transformative development in the sector is the transfer of public assets in education and health through privatization, which has bolstered the economic contribution of nonprofit organizations. Leading public institutions, such as King Saud University and King Faisal Specialist Hospital and Research Centre, have transitioned into nonprofit foundations.Footnote ¹⁴ This move is driven by the belief that the nonprofit sector is better equipped to deliver these services, and that innovation will thrive under the non-profit model.

Consequently, Saudi NPOs are now positioned to lead locally and regionally, competing globally in excellence, efficiency, and service delivery. This growing trust in the nonprofit sector is also evident in the increased contracting of public services to NGOs, including public orphanages and family services. Various ministries are partnering with the nonprofit sector to deliver critical services in environmental protection, gender-based violence prevention, and social care facilities.

Trust in the sector has reached unprecedented levels. Historically, the Saudi NPO sector faced challenges related to financing terrorism and money laundering, leading to reputational issues and vulnerability to suspicion. However, ongoing oversight and reforms, along with assurances from financial regulators, have resulted in high scores during mandatory annual governance audits. In 2023, the sector achieved a remarkable governance score of 97, according to the National Center for Non-Profit Sector. Periodic public surveys conducted by KKF indicate an improvement in public perceptions, with 86 percent of Saudis deeming the sector trustworthy. The proportion of Saudis who view nonprofits as untrustworthy has declined from 27 percent in 2017 to 14 percent in 2024.Footnote ¹⁵

As the Saudi NPO sector grows, it faces the challenge of balancing stringent global regulations with the need for operational flexibility. By engaging in forums such as the C20 and the FATF, KKF and other sector actors have influenced regulatory reforms, facilitated access to funding, improved sector governance, and set the stage for greater impact. These developments underscore the dynamic evolution of Saudi Arabia’s nonprofit sector, highlighting its expanding role in societal development and the increasing trust it commands within the community.

Unlocking Regional Catalytic Capital

With the right regulatory frameworks in place, the nonprofit sector in the Arab world has the potential to grow into a multibillion-dollar industry, positioning itself as a core partner in development. By fostering job creation, empowering communities, enhancing capacity building, promoting climate action, and driving systemic change, NPOs can significantly contribute to sustainable progress. However, achieving this ambition requires their full integration into key decision-making processes and the creation of a regulatory environment that supports and incentivizes their growth.

This environment should be characterized by strong partnerships, community trust, and consistent institutional support, enabling NPOs to set benchmarks for excellence in innovation, governance, digital solutions, impact measurement, and sustainable development.

The potential for this sector to thrive is within reach. Current estimates from the University of Cambridge Centre for Strategic Philanthropy indicate that philanthropic giving in the Gulf Cooperation Council (GCC) alone amounts to approximately $210 billion annually.Footnote ¹⁶ While data reliability remains a challenge due to sector-wide inconsistencies, the trend undeniably signals strong growth in philanthropic contributions.

To translate this momentum into long-term sectoral sustainability, favorable regulatory reforms – combined with support from communities, businesses, and policymakers – could accelerate development and steer the sector toward a prosperous and resilient future over the next two decades.

To maximize impact, NPOs must be positioned as preferred partners in these efforts. This involves harnessing traditional giving mechanisms such as Waqf and ZakatFootnote ¹⁷ while also leveraging innovative strategies for community engagement, such as impact investing, blended finance models, and digital giving platforms.

Additionally, regional corporate tax reforms should be designed to incentivize genuine corporate philanthropy while mitigating risks of misusesuch as misclassifying marketing expenses or employee benefits as charitable contributions. Aligning tax benefits with initiatives that drive measurable social impact will encourage Arab businesses to play a transformative role in advancing sustainable development and integrating CSR into long-term national development strategies.

The Future of Multi-sector Partnerships and a Regional Renaissance

Within this evolving landscape, beyond a conducive regulatory framework, the single most critical factor will be the ability of NPOs to collaborate effectively and form multi-sector partnerships. The growing recognition of public–private–philanthropy partnerships (4Ps) as a transformative model is becoming increasingly mainstream, particularly as the funding gap for the SDGs continues to widen. These cross-sector partnerships not only enhance financial sustainability but also drive innovation, enable scalability, and create systemic impact.

A key pillar of the 4P model is asset transfers, where public entities allocate land, infrastructure, or seed funding to nonprofits, empowering them to address societal challenges with sustainable solutions. These asset transfers should be viewed as catalytic investments, unlocking the potential of the nonprofit sector to pioneer innovative and scalable solutions for pressing regional challenges.

Saudi Arabia has made significant strides in fostering multi-sector partnerships, setting an example for regional philanthropy and social innovation. Several high-impact initiatives demonstrate the Kingdom’s commitment to leveraging public assets to empower nonprofits:

• The Misk Foundation has allocated land for the development of innovation hubs and educational institutions, focusing on youth empowerment and capacity building.

• The NEOM megacity project integrates nonprofits and social enterprises into its framework, providing public resources to drive sustainable and inclusive development.

• Environmental sustainability initiatives have received substantial government backing, including land and funding allocations for nonprofits dedicated to climate action and conservation.

• The Saudi Social Development Bank (SDB) has taken an active role in providing seed funding to NGOs, helping them access capital, build long-term sustainability, and expand social impact initiatives.

These initiatives demonstrate Saudi Arabia’s leadership in embedding the third sector into national development efforts, positioning nonprofits as key stakeholders in economic and social progress. By institutionalizing asset transfers and fostering cross-sectoral collaboration, Saudi Arabia is setting a precedent for the broader Arab region.

Ensuring Robust Governance for Sustainable Impact

However, to fully harness the potential of 4Ps and asset transfers, robust governance frameworks are essential. Without clear regulatory mechanisms, these partnerships risk inefficiencies, mismanagement, and inequitable distribution of resources. Several key principles must guide the development of these frameworks:

• Accountability: Nonprofits receiving public assets must adhere to strict governance standards, ensuring funds and resources are utilized effectively.

• Transparency: Clear reporting structures must be in place, allowing public oversight and open disclosure of how transferred assets are managed.

• Performance Metrics: Establishing impact-driven benchmarks will help measure effectiveness, scalability, and long-term sustainability.

• Stakeholder Collaboration: Strong partnerships between governments, businesses, and civil society will maximize collective impact while ensuring equitable resource allocation.

When governed with accountability and transparency, asset transfers and 4P partnerships can serve as the cornerstone of a thriving, resilient, and impactful nonprofit ecosystem.

A Regional Renaissance for Philanthropy

Looking ahead, the future of NPOs and the impact sector in the Arab region is poised for unprecedented expansion, driven by economic growth, regulatory reform, and evolving social investment models. Economic projections underscore the transformative potential of philanthropic capital in driving sustainable development.

By 2050, Saudi Arabia is expected to become the world’s eighteenth largest economy with a GDP exceeding $3 trillion.Footnote ¹⁸ With such a robust economic foundation, NPOs are set to emerge as a major driver of regional prosperity, unlocking new opportunities for social investment, economic diversification, and long-term development.

The Arab region stands at a pivotal moment, where strategic regulatory frameworks, financial incentives, and a culture of multi-sector collaboration can elevate civil society into a global force for change. By fostering an enabling environment for nonprofits, the region can maximize their contribution to job creation, expanding employment opportunities across diverse sectors and volunteering growth, fostering a culture of civic engagement. They can drive economic inclusion, integrating social enterprises into mainstream development and address poverty alleviation, leveraging evidence-based solutions to drive systemic change.

As the Arab world redefines its impact landscape, the intersection of economic growth, regulatory progress, and innovative social investment presents unparalleled opportunities for impact. Saudi Arabia has set a new standard for integrating NPOs into national development, demonstrating how multi-sector partnerships can serve as a catalyst for social transformation.

By embracing collaboration, innovation, and governance excellence, the Arab nonprofit sector can position itself as a global leader in social impact – unlocking a new era that is ambitious, data-driven, and deeply embedded in national progress. The path ahead is clear: with the right regulatory foundations, the third sector in the Arab world can transition from a charitable endeavor to a powerful driver of systemic change, advancing prosperity, equity, and resilience for generations to come.