Social entrepreneurship through microfinance

The concept of social entrepreneurship can be considered as a new business idea but an endeavour that has huge potential in Oman.

This was the promising statement issued in a local newspaper in 2016 when the country is motivated to increase the private sector’s role in the nation’s economy.

The most known type of social entrepreneurship model reminiscing back to the 1900s was Microfinance. This model provides loans to small-scale individual businessmen and was popularised by Professor Muhammed Yunus in 1976 when he lent his money worth 27 dollars to about forty-two stoolmakers in a small town in Bangladesh.

Pioneering microfinance has broken the poverty cycle which has led to the establishment of the Grameen Bank in 1983 to serve millions of people from developing countries through microfinance and help them alleviate poverty.

The fundamental premise of microfinance is to assist individuals through loans especially those who cannot qualify for loans in traditional commercial banks. Services provided by microfinance include savings, loans, remittances, affordable financial services, insurance, and payments.

Studies have shown that 74% of the recipients of microfinance loans are women and, in line with the 90% of women customers of Grameen Bank.

In terms of benefits, microfinance uplifts the status of women, provides employment opportunities, and develops a successful community.

A statement by an official of Riyada named Khalid al Haribi in 2016 revealed that it is high time for Oman to embrace social entrepreneurship as a way to address the present economic situation and to raise the growing concern of business sustainability.

According to the data provided by the World Bank (2023), although Oman has a zero poverty ratio, many businesses in Muscat alone are classified as micro, small, and medium enterprises.

The Arabian Stories (2022) published a statement that the Governorate of Muscat has the largest percentage of micro, small, and medium enterprises last March 2022 with 24,977 establishments.

This may imply that the necessity of strengthening the microfinance activity is a timely action to serve the individual businesses who experienced capital deficiency.

For instance, looking at the profile of businesses in Oman, there are approximately more than twelve (12) souks for example nationwide operated by small-scale entrepreneurs and they rely on daily sales and small capitalisation rolled daily.

With few lenders available including selected banks in Oman, the pressure of micro entrepreneurs to source out required funding poses a real challenge.

In the Asia-Pacific region, microfinance had been instrumental in providing affordable financial services to the poor and underprivileged as these people don’t have access to the formal services offered by banks.

Microfinance is sourced from rural banks and cooperatives, non-governmental organisations, and individual money lenders. Even though there is a disparity in the economic situation between Oman and the Asia Pacific region, the cases of micro-entrepreneurs operating their businesses possess similar characteristics.

The message of this article from the authors’ viewpoint is that social entrepreneurs partake co-equal part in building the nation’s economy.

To develop social entrepreneurs, the concept of social entrepreneurship needed to be promoted from the grassroots level to the national level. Massive campaigns can be an effective strategy for people to internalise the value and relevance of social entrepreneurship to the current entrepreneurial state of the country.