Thursday, March 28, 2024 | Ramadan 17, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Banking credit to Omani SMEs lags at 3.2 per cent, well below mandated 5 per cent: CBO

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Loans provided by commercial banks to SME funding agencies can now be considered – up to a certain limit – as credit to SMEs themselves in the calculation of their shares towards banking credit for small and medium businesses.


The measure comes as banking credit to the SME, mandated at a minimum of five per cent of a bank’s total credit portfolio, has faltered – a trend that the Central Bank of Oman (CBO) has been seeking to reverse.


“If banks support specialised SME funding agencies, then we allow the banks to regard up to 1 per cent of these loans as loans to SMEs. This is one way of trying to encourage banks to support the SME sector,” said Tahir bin Salim al Amri (pictured), Executive President – Central Bank of Oman.


Speaking to the Observer, the official lamented that the share of banking credit to SMEs currently averages “3.2 per cent” as opposed to the stipulated minimum of 5 per cent of total credit. But he acknowledged the challenges faced by banks in meeting this target.


“We are trying to encourage banks to achieve that target, but given the current economic circumstances, it has a lot to do with the risks that banking institutions are willing to take.”


In 2018, credit allocations to SMEs amounted to a mere three per cent of gross loans disbursed by banks, representing a “very small part of the lending of banks”, said the apex bank in its 2019 Financial Stability Report.


The CBO has sought to repeatedly remind commercial banks of the vital role that SMEs play in fuelling job creation and economic development. “SMEs not only form an effective conduit to provide employment, but these may also serve as the engine for economic growth. In the backdrop of a drive to create more job opportunities in the private sector, it is imperative that the banks fully support this segment,” it has stressed.


The CBO has also urged banks to pay particular attention to medium-size enterprises which “often tend to get less attention and financing” as opposed to small and micro enterprises, which “attract excessive focus”. Of a total of 5,454 Omani SMEs that were established in 2018, only 198 fell in the category of medium-size businesses, the remainder classified as small or micro enterprises.


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