Pandemic imperils Omani SMEs unless they innovate

Thousands of Omani owned and operated small and medium enterprises (SMEs) are contemplating a bleak future amid the lockdown ordered by Oman’s authorities to help contain the spread of the novel coronavirus (Covid-19), and by the intensifying downturn sparked by the recent collapse in international oil prices.

With the government already hamstrung by its own deepening fiscal constraints, aggravated by plummeting oil revenues, many of these micro-businesses will need to innovate in order to stay afloat, according to one of Oman’s leading authorities on SMEs.

Shaikh Salah Hilal al Maawali (pictured), CEO – SME Development Fund, said: “I urge the owners of SMEs not to wait for things to improve, but to do whatever it takes to remain in business. This may require them to be a bit creative and innovative, perhaps harness technology, ecommerce or other tools, consult with those with experience in business continuity, and so on.  By taking these steps, entrepreneurs can hope to recover quickly when the situation improves.”

Speaking to the Observer, Al Maawali however acknowledged that, given the magnitude of the crisis, Omani SMEs face a difficult period ahead as they attempt to weather the lockdown and downturn.

“I think the impact will be more severe from April onwards as the owners, with their establishments shuttered by the lockdown, will still have expenses to shoulder, in the form of salaries for their staff, rent, electricity, loan instalments and so on.  Even if they take advantage of deferments in the payment of loan instalments, they are still liable to pay the interest on the loan, and so on.”

Significantly, SMEs represent an important segment of Oman’s economy.  With an estimated 200,000 registered businesses, they account for a sizable 23 per cent of the Gross Domestic Product (GDP).

Earlier, Al Maawali welcomed measures announced by the Central Bank of Oman (CBO) aimed at alleviating the financial impact of the pandemic and downturn on small businesses. The apex bank had directed banks, finance and finance leasing companies to favourably consider requests for deferment of loan instalments from affected borrowers, particularly SMEs, with immediate effect for the next six months without adverse impacting the risk classification of such loans.

However, these measures will not go very far in easing the “huge” financial challenges that SMEs will be saddled with as a result of the crisis, he said.  Furthermore, with banks and financial agencies facing their own difficulties posed by the crisis, they are unlikely to incur any losses themselves by, for example, waiving the interest incurred on loans payable by small businesses, he noted.

“Let’s be logical here: This crisis is impacting even big companies, whether in Oman and globally. Everyone, including banks and financial institutions, are suffering a degree of hardship,” he lamented.

The official also cautioned against expectations of a bailout from the government which is itself grappling with slumping oil revenues, mounting deficit, and a steep interest burden on accumulating debt.

In the circumstances, entrepreneurs and small businesses need to suitably gird themselves for rough times ahead, said Al Maawali. In the interest of business continuity in the face of upheavals of the Covid19 kind, SMEs should consider putting aside savings for use in such contingencies. They should also put in place strategies for implementation in response to all kinds of future scenarios, he said.

But he recognized that most SMEs, as single or family owned businesses, did not have the luxury of such resources and capabilities to invest in disaster planning strategies. This, he remarked, was part of the early lessons for entrepreneurs and SMEs from the Covid19 crisis.

[Tomorrow:  ‘Incentives necessary for Omani SMEs to help fight ‘hidden trade’]