For HSBC Bank Oman, supporting SMEs goes well beyond just providing funding. High on the bank’s SME agenda are educating entrepreneurs and giving them access to the right information. Excerpts from an interview with Daniel Felton, Head of Corporate and Business Banking, HSBC Bank Oman.
Can you elaborate on HSBC Bank Oman’s initiatives for promoting the SME sector in Oman?
HSBC Bank Oman is dedicated to supporting SMEs in Oman. Among the specific initiatives of the bank for SMEs, funding is very important, as it is often front and centre of any bank’s relationship with customers. HSBC Bank Oman recognises this and in what is a very specific and tangible demonstration of our commitment to the SME sector, in November 2014, we launched an International Growth Fund worth RO20mn dedicated to the SME segment in Oman. The fund is open to new and existing international and internationally aspirant SME customers with cross border trading requirements and annual turnover of RO1mn and above. This is where we can add real value to a SME banking relationship. It has been very successful over the last ten months and we are hopeful that we will top it up further before the end of this year.
That being said, supporting SMEs is not all about funding though; it is about a banking relationship as a whole. Apart from funding, there are other solutions that a bank can offer such as cash management, corporate cards, online banking etc. Depending on the need of the SME, all could be key to successful business growth. In addition and perhaps most importantly, educating the SME owners and providing them with access to the right information is critical. Without the right information and the right SME specific education, funding and the rest of the banking and financial services become far less effective.
Some of the initiatives undertaken by HSBC Bank Oman for creating awareness and educating entrepreneurs include the ‘HSBC Growth Series’– a series of seminars focused on SMEs and covering a range of topics. We had a seminar on how businesses can succeed in overseas trade by correctly scoping the full potential of markets and selecting the right strategy for market entry. Another session was focused on working capital management, explaining the best ways of managing working capital and providing some guidelines to the SME owners on this. We also had another session in September focused on the large infrastructure development projects in Oman and how SMEs can capture a fair chunk of this business. In addition, we issue a newsletter every quarter covering a range of information, topical articles, case studies from different countries etc. Furthermore, we have recently partnered with the British Council to deliver ‘Springboard’, an educational programme for Omani female entrepreneurs. We believe that these programmes play a key role in the ongoing development of the SME segment in Oman.
How has been the initial response to your International Growth Fund?
So far, so good. It’s been a positive start. We have almost allocated 100 per cent of the fund. It is well placed and has been well received by the market. Following this initial success, I am hopeful we will be in a position to announce an additional commitment on this towards the end of the year.
SME owners complain that access to financing is one of the major problems when they approach banks and other financial institutions. What should SME owners do to overcome the funding challenges?
First of all, do your research to know your options; and then find out how they fit in with your particular business requirements. In the market here in Oman, there are a whole range of financing options available, including the banks. Initiatives such as the Al Raffd Fund, Riyada, various government loan schemes, finance companies and various private sector initiatives are all present. I encourage all SMEs to research the wide range of options available to them and to be fully aware of what is most suitable for them. When you know your own requirements, you can make an educated decision and be prepared accordingly to approach the right solution.
Once you have made up your mind, you can then approach the right solution with greater confidence. Research we have done internally shows that a significant amount of SMEs don’t go to financial institutions because they think the answer will be an invariable ‘no’. You can’t assume that the answer will always be no. Sometimes there will be additional requirements you have to provide, this is normal, but when you are well researched and prepared, these requirements become less of a barrier. For instance, in HSBC Bank Oman, we assess every request from our customers based on their individual merits.
I would like to add that it is very important to understand as an SME why you need finance. That is why I go back to the point about information and education. Traditional funding might not necessarily be the sole answer to your needs. You may have a working capital problem and your bank might be able to advise how to better manage that so you don’t actually take on any additional financing. For example, rather than using a debit card to use at the ports to pay your customs clearance, there are credit card solutions that could provide you with a period of free credit to help with this.
Therefore you need to understand why you need funding. Maybe, after having a conversation with your bank, the answer might be something else.
Coming to the general scenario, what is your opinion about the state of affairs of the SME sector in Oman? What more needs to be done to make the sector more competitive?
The SME market in Oman is a young and evolving segment. I am impressed with the Government’s regulatory focus on supporting SMEs. The intention is very positive and spot-on to be honest. SMEs need to be the engine of the economy and of economic diversification as well. For a country like Oman that is heavily reliant on hydrocarbons, SMEs are increasingly important especially in the current economic environment. I think, equally, that further refinement is required as the segment grows to ensure its growth and innovation.
The decision to award 10 per cent of government contracts to SMEs is a great initiative. It will absolutely assist the growth of SMEs. But we need to track it well and ensure that it is actually being implemented and that SMEs are equipped to execute the subcontract they receive as part of the process.
The second thing I would say is that in my experience, SMEs often lead the way for the economy as a whole from an innovation, modernisation and digitalisation perspective. That is often because it is a highly competitive segment and market where smaller businesses need to find an edge over their immediate, and often larger, competitors; and so, necessity being the mother of invention, it often forces SMEs to take the lead in implementing progressive business solutions. It is going to help not only the SME sector, but everyone else is going to benefit too. The economy will continue to modernise and become more efficient. For example, as more things are done online, alternative methods of distribution, sales and payments are introduced – increasing production, efficiency and speed. Much of this type of innovation has often come from the SME sector. The future for SMEs in Oman is positive. In addition to the continued intent of the Government and the regulatory environment, in order to continue to grow, SMEs need to continue to be innovative and competitive and that is the way forward for the sector in Oman.