Banks must give more loans to small firms

A call for penalising banks that do not adhere to the regulation on providing credit to small and medium enterprises (SMEs) in the Sultanate was made by a high-ranking official at a meeting here on Wednesday. “Hefty fines should be imposed on commercial banks that do not allocate the mandatory five per cent credit to SMEs,” urged Shaikh Salah bin Hilal al Maawali, CEO, SME Development Fund. He said banks are not willing to provide loans to small companies on grounds that they are not properly managed and there is risk involved in repayments. “Some bankers even went to the extent of saying that they prefer to be fined instead of extending loans to SMEs,” he said on the sidelines of Oman Forum 2017 here on Wednesday.

The Central Bank of Oman has mandated that all banks operating in Oman allocate five per cent of their total credit portfolio to SMEs following a Royal Directive in 2013. The apex bank circular stipulates that the banking sector encourage the growth of SMEs in the country by formulating a liberal lending policy for taking cognisance of the government’s vision and the regulatory initiatives of the Central Bank in this regard. Al Maawali said if a company that is aspiring to avail of the loan facility and found to be lacking proper management of its assets or financial accounts, the bank should come forward to assist it with a solution. The Royal Directive stipulates the provision of a specialised mechanism in association with the Tender Board to allocate a percentage of tenders to SMEs. He said SME is a complicated sector.

The solution doesn’t come from government, educational institutions or large enterprises alone. “We have to work together and help each other to overcome barriers in the sector,” he said. Unfortunately, there has not been a correct mechanism to put things in order, he lamented. According to Al Maawali, the SME sector in the Sultanate is in a growth trajectory. “The contribution from the sector to the national GDP is expected to witness significant growth in the coming years,” he said. He said the SME Development Fund has so far disbursed loans worth RO 33 million to more than 350 companies, which have about 1,000 employees working with them. Of this amount, RO 12. 5 million has been allocated this year, while RO 14.5 million is expected to be disbursed next year, he said.