05 December 2011
MUSCAT: Financial institutions should enhance lending volumes to small and medium enterprises (SMEs), which are engines of economic growth in any country, said Abdul Kader Askalan, chief executive officer, Oman Arab Bank (OAB).
Participating at the discussion forum on investment in free zones, Askalan said that 35-40 per cent of the loans offered by banks is personal loans and not much lending is done to scale up the percentage of lending to SME projects in Oman.
"Though these personal loans help people, it does not support the economy as a whole. Re-payment of personal loans takes a long time and so it is time to determine the time frame for repayment. This move will help to support the increase in lending to small and medium enterprises in the country."
"There is a continuous dialogue between us and the Central Bank of Oman with regard to this. So, time is opportune to reduce the personal loan percentage and divert to lending to economic activities," he further added.
Agreeing that personal loans bring in more profit to banks, Askalan added, "Small and medium enterprises should get its share of lending proportionately."
According to rough estimates, about five per cent of SME portfolio constitutes banks' over-all books notwithstanding the fact that there is significant potential for the SME segment in Oman to grow in terms of contribution to gross domestic product (GDP) and creation of employment.
New job opportunities
Askalan said that the small and medium enterprises Loan Guarantee Agreement signed by the Ministry of Commerce and Industry, Oman Development Bank, BankMuscat and Oman Arab Bank was aimed at establishing an active private sector that can contribute to diversifying the activities of the Omani economy and create new job opportunities through facilitating finance of the projects by Omani youths.
Vision 2020 aims at having SMEs account for around 50 per cent of manufacturing in Oman. Agreeing with a participant that small and medium enterprises are need of the hour and commercial banks must re-orient their lending policies, Askalan said that the small and medium enterprises can play a catalyst's role in the development of Oman and government is also realising the importance of small and medium enterprises in reshaping the industrial sector.
According to sources, banks are now better equipped than before to handle the varied needs of the SME sector due to better technology and risk management and it is only a matter of time that banks should scale up its lending volume to small and medium enterprises.
Elaborating about lending to big industrial projects, Askalan said the initiative to create an industrial bank should come from the government as the government can be the major shareholder in such a bank and financing the industry primarily need support from the government as it entails large funding.
He said banks give loans based on assets and reserves and so it is not easy to finance big industrial projects as based on only 15 per cent of its assets and reserves can be given as industrial loans.
He said Oman already has two similar banks -- Oman Housing Bank and Oman Development Bank -- which finance certain industrial projects within certain limits. So, government is assisting the big projects in some way.
MUSCAT: Financial institutions should enhance lending volumes to small and medium enterprises (SMEs), which are engines of economic growth in any country, said Abdul Kader Askalan, chief executive officer, Oman Arab Bank (OAB).
Participating at the discussion forum on investment in free zones, Askalan said that 35-40 per cent of the loans offered by banks is personal loans and not much lending is done to scale up the percentage of lending to SME projects in Oman.
"Though these personal loans help people, it does not support the economy as a whole. Re-payment of personal loans takes a long time and so it is time to determine the time frame for repayment. This move will help to support the increase in lending to small and medium enterprises in the country."
"There is a continuous dialogue between us and the Central Bank of Oman with regard to this. So, time is opportune to reduce the personal loan percentage and divert to lending to economic activities," he further added.
Agreeing that personal loans bring in more profit to banks, Askalan added, "Small and medium enterprises should get its share of lending proportionately."
According to rough estimates, about five per cent of SME portfolio constitutes banks' over-all books notwithstanding the fact that there is significant potential for the SME segment in Oman to grow in terms of contribution to gross domestic product (GDP) and creation of employment.
New job opportunities
Askalan said that the small and medium enterprises Loan Guarantee Agreement signed by the Ministry of Commerce and Industry, Oman Development Bank, BankMuscat and Oman Arab Bank was aimed at establishing an active private sector that can contribute to diversifying the activities of the Omani economy and create new job opportunities through facilitating finance of the projects by Omani youths.
Vision 2020 aims at having SMEs account for around 50 per cent of manufacturing in Oman. Agreeing with a participant that small and medium enterprises are need of the hour and commercial banks must re-orient their lending policies, Askalan said that the small and medium enterprises can play a catalyst's role in the development of Oman and government is also realising the importance of small and medium enterprises in reshaping the industrial sector.
According to sources, banks are now better equipped than before to handle the varied needs of the SME sector due to better technology and risk management and it is only a matter of time that banks should scale up its lending volume to small and medium enterprises.
Elaborating about lending to big industrial projects, Askalan said the initiative to create an industrial bank should come from the government as the government can be the major shareholder in such a bank and financing the industry primarily need support from the government as it entails large funding.
He said banks give loans based on assets and reserves and so it is not easy to finance big industrial projects as based on only 15 per cent of its assets and reserves can be given as industrial loans.
He said Oman already has two similar banks -- Oman Housing Bank and Oman Development Bank -- which finance certain industrial projects within certain limits. So, government is assisting the big projects in some way.
© Times of Oman 2011
