Ahlibank provides customised, flexible and user friendly financial solutions with faster turnaround time. Beyond the regular financing at competitive rates, ahlibank also plays a key role in non-financial inputs to the segment by way of mentoring and advisory roles, says Azzan Al Saleh, Deputy Head – SME
What is your opinion on the state of affairs of SME sector in Oman at present? What all SMEs in Oman need to do to grow more competitive and dynamic?
Let us understand that SME by definition are such enterprises which employ workforce up to 99 and annual turnover not exceeding RO1.50mn. In Oman, the latest data indicate that 40 per cent of the workforce is employed in SME firms while the contribution to the GDP ranges between 15 per cent and 20 per cent. The key point here to note is that in Developed markets, SME workforce ranges between 50-60 per cent and on an average GDP contribution from this segment is 50-55 per cent. Hence it is important to expedite growth of the SME sector in Oman considering the limited employment opportunities for citizens in Government sector and also to scale down our reliance on hydrocarbon sector.
The SME sector needs to be innovative to be more competitive and dynamic. This in turn will help in delivering the products in a cost efficient manner, expand their customer base and also to tap new markets considering their inherent flexibility of low employee base.
Could you please tell about ahlibank’s initiatives aimed at helping the SME sector?
At ahlibank, we understand that SME segment is crucial to the overall growth and development of the country and we strive to be a part of that growth story by being partners with our SME business associates. We provide them with customised, flexible and user friendly financial solutions with quick turnaround time. Beyond the regular financing at competitive rates, ahlibank plays a key role in non-financial inputs to the segment by way of mentoring and advisory roles. With our existing commercial banking set up in the country, we are able to support SME’s to plan their growth by informing and preparing them for hurdles they will face and how to counter them effectively. The broader objective is to foster and support sustainable business leadership amongst our SME partners in the segments that they operate.
What are the sectors where SMEs in Oman need focus?
The policies and business incubators in Oman should take into consideration Oman’s economic structure and its competitive advantages while deciding on the sectors for the SME’s to operate on. Given Oman’s dependence on hydrocarbon sector, it is suggested that SME’s grow their businesses around manufacturing, trade and other allied activities like tourism. In the IT and ICT segment we have seen substantial business being covered by Omani entrepreneurs. One of the key areas that we should look at focusing is the fishing sector considering Oman’s coastal line. Augmenting this is the tourism industry which has much to offer to the tourists who frequent the region. Oman is a unique jewel in the region with its unique cultural and heritage offerings. If we can build our business around these core competitive strengths and allow the SME’s access to infrastructure and marketing at incentivised costs, I believe growth opportunities are tremendous. We always educate the SME entrepreneurs that liquidity is as important as profitability and they should not lose focus of liquidity in their pursuit of profitability since lack of liquidity can destroy even a profitable venture.
Im not sure if IT & ICT segment comprise a big segment of Omani Entrepreneurs. Yes, fisheries seems to be an untapped segment due to the abundance of coastline in Oman. Tourism is another sectior that the government is focusing on and has good potential for SME businesses.
Several SME owners say access to financing is one of the key challenges faced by them. What should they do to overcome this challenge?
In today’s market let us understand that access to financing for SME’s has been made relatively easier by the initiatives of Government and CBO. Government of Oman has set up Al Rafd Fund worth RO70mn, specifically to support SMEs, which is increased by 10 per cent every year. CBO has mandated that credit off take to SME sector should be at least 5 per cent of the overall credit of the banking system and this is expected to create a total corpus of around RO850mn for financing the SME sector. The recent announcement by the Government that all payments to SME sector to be paid within 28 days will further improve the financial position of the SME sector.
Although there are ample opportunities for SME clients to obtain funding, borrowers need to be educated in terms of accounting, feasibility studies, business discipline, cash flow projection & management.
What are your future plans for the SME sector? And how do you rate the future prospects of SME sector in Oman?
As I said earlier we have a dedicated large resource pool in place in ahlibank which caters to the SME sector. We also impart sectoral based training to our staff allowing them to identify competitive sectors within SME’s which in turn allow them to advise the SME’s on future growth prospects and also obstacles they will encounter. Considering the need for faster turnarounds in this sector we have also created separate risk assessment teams with more discretionary power. Added to this, we have our Islamic banking window “Al Hilal” which offers the entire gamut of SME banking products guided on sharia principles. All these enable us to deliver solutions to the end customer efficiently and faster.
I believe the future prospects of SME’s are definitely bright and they will be the future drivers of employment generation. In Oman, as per the Public Authority for SME Development (PASMED), 90 per cent of all firms in the country are SMEs and out of this based on review by Ministry of Manpower statistics, a vast majority are micro enterprises, employing five or fewer persons. Hence our efforts should be to promote and nurture this entrepreneur spirit and create a congenial environment by promoting fair competition for this sector. Recent announcements by the Govt allocating a minimum of 10 per cent of all Government contracts / purchases to SME sector and relaxations in localisation norms will go a long way in boosting the SME sector.