SME projects need more capital to drive forward

SALEH AL SHAIBANY – saleh_shaibani@yahoo.com – The future of Oman’s diversification and consolidation of the economy would be much clearer with increased investments in the Small to Medium Enterprises (SMEs) projects.
SMEs have been the cutting edge solution for many emerging countries. Oman can go the same way towards a fully fledge program to fuse together different efforts to make it work in a big way. Despite challenges of lower oil prices, Oman can still harness its full potential in empowering self-employment to encourage its citizens to go all the way to help the financing of projects.
However, this is not just the effort of the government alone, the private financial institutions must also whole heartedly jump into the band wagon. So far, only state-owned banks like Oman Development Bank and other funds like Al Raffd have made the effort. To make it work in a successful way, the private and public partnership is much needed.
The Sultanate will surely come out with positive results for a clear future to further raise the attractiveness of Oman’s business environment when the private sector also take up the financing challenge. In 2016, 7,136 SMEs have been established in Oman. However, these projects declined by 11.6 percent in the first six months of this year compared to 1,694 projects in the same period in 2016. The reason of the decline has not been documented but it may well indicate that the incentives to make these projects flourish are not adequate.
But the government remains optimistic on business growth with small projects anchored deep in the economic reforms. Much of the SMEs projects are spurred by Foreign Direct Investments (FDI). In 2016, Oman registered a total of about RO 7.4 billion in FDI. These foreign investments range from energy, real estate, transport, manufacturing, hotels and tourism
But the bright light in SMEs shines on manufacturing where most of the supplies are needed from the local resources. With the dynamism and a strong pedestal already in place, all it needs is a continuous commitment to monitor the SMEs and check on their progress.
With concentrated efforts, SMEs will also cut down the unemployment queue. According to the official statistics, there are over 35,000 graduates from various institutions looking for jobs every year.
By creating jobs, growth as well as income, entrepreneurship can transform the communities around them. Pivotal to the SME push is not the government’s incentives but from the private companies. Despite the lower oil prices, the Sultanate’s banking industry is still a robust one, according to remarks made by the Central Bank of Oman’s Chief Executive Hamoud Sangour Al Zadjali. However, the strength of the banks needs to translate to better SME financing.
Last year, the loan growth from the financial institutions to SMEs has stagnated. This year, the stagnation is expected to continue. It is clear that banks drive the success of small to media projects with capital between RO 25,000 to 150,000.
With the current economic scenario, banks seem to be cautious and reluctant to take the financing risks. It is very clear that if the SMEs are starved than the economic growth will not make any impact in the country. For SME owners, the challenges are obvious but opportunities are clear to them but the journey to secure the capital is not an easy one for them.
One way forward for the local SME owners is to divest to new technologies in the renewable sector. The “cleantech” industry in energy such as the solar power and wind projects is buzzing around the world but yet to catch up in Oman. Small businesses in the renewable sector is much needed here but and it is key to meet the county’s energy targets. It is especially important now that oil prices are not dependable any more.
However, they need more support to meet the challenges to make them a reality in Oman. This is one sector that will create a pool of knowledge and expertise to diversify the economy in a different direction from the oil-based industry. Local banks would also be encouraged to help small businesses to invest in this new technology that has no rival but a much bigger potential.