Business opportunities of non-banking finance companies (NBFCs) in the Sultanate are to get wider with the Central Bank of Oman (CBO) deciding to give them more avenues, including issuing of credit cards.
The recent circular of the CBO says that after looking into the challenges and solutions to develop the leasing and finance industry and provide additional avenues for more and diversified sources of business, it was decided to allow them to engage in additional activities.
Finance and leasing companies (FLC) could issue white-labelled credit card carrying their names to accommodate the requirements of customers in collaboration with local banks.
But issuing banks would have to take responsibility for administrative, settlement and other related jobs. The role of leasing firms would be limited to branding and marketing of credit cards. FLCs should exercise necessary diligence and restraint in promotion of credit cards, the circular says, noting that such facility is being offered as payment convenience and short-term accommodation. Credit card exposure to individuals of FLCs should be within the ceiling limit applicable.
They would have to seek the approval of the CBO before engaging in credit card activity submitting all particulars, including arrangements with banks and approved criteria for credit limits.
Targeting enhancing fee-based income, the circular says that NBFCs are allowed to issue guarantees to their customers, “subject to capturing 50 per cent for risk weightage for leveraging limitations and reporting accordingly”.
While NBFCs are not permitted to lend against shares, under the new rules, they can accept shares of companies listed on the Muscat Securities Market (MSM) as collateral for loans and credit facilities extended by them.
These initiatives should go a long way in not only widening activities of NBFCs but also help them contribute to the growth of the economy. A top official of an NBFC said that this was something that the industry had been waiting for.
Taageer Finance CEO Mohammed Redha Al Lawati said that the CBO move was a very positive initiative and finance companies would assess the viability of these cards after discussions with banks.
Allowing leasing firms to issue credit cards coupled with issuing of guarantees should be beneficial as there would be diverse products in the basket that are offered to customers, he added.