Liquidity key to ensuring credit needs are met: CBO

The tools that the Central Bank of Oman (CBO) has at its disposal to help maintain liquidity across both the conventional and Islamic banking sectors were among the key topics explored by Tahir Salim al Amri (pictured), the CBO’s executive president, in an interview he gave recently to Oxford Business Group (OBG).
Al Amri said that given the national push to boost non-oil growth, the CBO has taken steps to ensure the credit needs of the private sector, especially small and medium-sized enterprises (SMEs), can be met.
Oman is targeting the development of five economic sectors as part of its diversification strategy, namely: transport, tourism, fisheries, mining and manufacturing. “Presently, banks are advised to follow liberal lending policies for SMEs, with a mandate to extend a minimum of 5 per cent of their total credit to them,” he told OBG. “The CBO can tweak the regulatory limits, such as the lending ratio, if need be to promote credit expansion in the non-oil sector.”
Al Amri acknowledged that managing liquidity in the Islamic banking segment presented specific challenges, since some elements of conventional instruments were unsuitable for inclusion.
The Sultanate’s Islamic banking sector has developed rapidly in recent years, supported by the implementation of a new framework, although as in other countries where shariah-compliant products and services are available, liquidity has been an issue of late.
Al Amri said sukuk (Islamic bonds) issuances from both the government and private sector had proved popular, while short-term liquidity management was being done through interbank transactions. “The CBO is currently engaged in the consultative process of establishing liquidity management tools, and the initial progress in this regard has been satisfactory,” he told OBG.