MUSCAT, AUGust 24 – Personal loans disbursed by commercial banks in the Sultanate surpassed the RO 10 billion-mark for the first time in 2018, underscoring the sustained appetite for consumer credit. According to the newly published Annual Report of the Central Bank of Oman (CBO), personal loans distributed by commercial banks totalled RO 10.009 billion in 2018, up from RO 9.642 billion a year earlier — representing an increase of 3.8 per cent. Personal loans accounted for around 40 per cent of the total credit extended by commercial banks last year aggregating RO 25.07 billion, up from RO 23.544 billion a year earlier.
This share is largely in trend with caps stipulated by the Central Bank, which limits such disbursals at a maximum ceiling of 40 per cent of total credit with an additional 15 per cent for housing loans. So what is driving the growth of the personal loan portfolio of commercial banks in the Sultanate? Population growth is the primary growth driver, says Lo’ai Bataineh, Chief Executive Officer — U Capital. “Add to that a significantly large young adult population, as is the case for Oman, and you have a perfectly strong catalyst for this growth. Young people need house financing, car loans and personal loans to finance family needs as they are beginning to settle down into new jobs or marriages, especially with the nuclear family set up prevalent in Oman.”
Personal loans, according to the well-known banking and financial services expert, represent a relatively easy and convenient source of credit for a wide array of personal and household funding requirements. “Personal loans can be used to finance just about anything, from home building needs, for example, kitchen appliances, home decoration, and so on, to even investing into lucrative ventures where other forms of loans are not eligible. People get personal loans to finance any short- term cash flow need, like education, wedding, travel and so on. People even sometimes use it to finance cars which do not qualify for typical car financing due to the vehicle’s age’’.
Also contributing to the uptick in personal loans is the growth of the government and public sector workforce. Bataineh explained: “Recently, Oman’s government has resumed hiring, and these new employees are taking personal loans to finance their needs, especially when their salaries do not let them qualify for other types of loans, especially in the case of home financing. Home loan requirements are more stringent, with a minimum of RO 500 per month typically, and applicant’s employer to be preferably government, semi-government or any other renowned company.” Another factor driving personal loan growth is consumerism, which is growing especially in larger cities like Muscat, Suhar and Salalah, where people have many avenues to spend more which might require additional funding, he said.
Additionally, personal loans offer a convenient source of finance for pre-owned car purchases, according to the market expert. “People are not buying new cars, because of the current austere conditions, and sometimes they go for older vehicles (frequently bought from Dubai) which may not qualify for car financing. Hence, some people use personal loans to finance their cars in this way’’. Of late, ease of access and quick processing times have added to the growing appeal of personal loans as a source of credit, says Bataineh. “Generally, personal loans are attractive for people when interest rates are low. Usually, personal loans require salary transfers and are widely popular for quick processing times. TURN TO P15