Apr 24 2012
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RO 100m fund for SMEs
Raphael Parambi, Chief Executive Officer of the National Company for Projects and Management (NCPM), which is currently under formation with the mandate to administer the Fund, told delegates at the Third Oman Economic Forum that the project would have hugely beneficial implications for the government's SMEs development objectives.
According to Parambi, the Fund will be initially capitalised at RO 100 million with investments from private sector pension funds, financial institutions and a couple of large business groups.
The capital will be raised in five tranches of RO 20 million each, with the first tranche likely to be raised before the end of this year.
In addition to making subsidised finance available for Omani entrepreneurs, NCPM will also provide training, nurturing, monitoring and legitimising services to ensure the success of their SMEs. The cost of subsidising interest rates, as well as NPCM's activities, will be met through government grants administered by the ministry, he said.
Importantly, the new initiative is primarily targeted at Omani school and college students with the aim of inculcating in them an entrepreneurial spirit and encouraging them to pursue self-employment opportunities.
"This is a very ambitious project and our goals are equally ambitious," Parambi said.
"Over the next 10 years, we hope to cover every college campus and major selected schools to train 500,000 students."
He said the project has the potential to generate thousands of small and medium enterprises, as well as contribute around RO 1 billion in value addition to the economy.
"While we can expect as much as 5-7 per cent success, our estimates are based on a 1.5 per cent success. Even then, we hope to generate 7,500 successful entrepreneurs. Many of these will be happy to be small -- with just two employers and RO 2,000 in value addition per month. But many others will grow into much larger SMEs with 100-plus employees. Taking an average employee strength of 7, we hope to contribute 50,000 jobs, and taking an average value addition of RO 8,000 per month, we hope to contribute a billion Omani rials of value addition by the 10th year," the CEO stated.
The SME Development Fund, currently under incorporation, is closely aligned with the government SME development goals, said Parambi. "Its organisational structure will be ready by next month and comprises of a capitalised fund which is presently under formation whose main objective is to finance SMEs in a flexible way. NCPM is a special purpose vehicle to grant finance to the SME Development Fund for undertaking activities, such as training in campuses, nurturing, legitimising and subsidising interest."
The Fund will be governed by a four-point charter, the CEO explained. "The first objective is to address the issue of inadequate interest in entrepreneurship. We will go to every college campus and later visit schools as well, to create an atmosphere of entrepreneurship, provide formal training, establish entrepreneurship clubs, encourage entrepreneurial activity on campuses, and create a culture of entrepreneurship."
Other objectives are to strengthen existing and new SMEs; nurture enterprises through the provision of low cost accounting services; provide mentoring support; extend commercial and subsidised funding in return for compliance with the discipline required during nurturing; and create in conjunction with other stakeholders a level playing field for the SMEs in improving order book flow, deal flow and business flow.
Earlier, Parambi attributed the high failure rates afflicting the SME sector to a number of "internal and external challenges". They include insufficient interest in entrepreneurship, inadequate understanding of accounting and finance, lack of market access, paucity of finance, and poor soft skills, such as customer focus, work ethics, sincerity, and so on.
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