Annual lending reaches RO 36 million
MUSCAT -- Oman Development Bank SAOC (ODB) has made considerable contribution to the small and medium enterprises (SMEs) sector, with the annual lending reaching RO 36 million as against the target of RO 60 million by 2010. The bank offers soft loans ranging from RO 20,000 to RO one million per project at three per cent rate of interest, and interest-free loans up to RO 5000.
The ODB has been playing a key role in the promotion of entrepreneurship by way of providing soft loans for SME projects in all development sectors, since its inception in 1977. In the farm, fisheries and animal resources sectors alone the ODB has financed projects to the tune of RO 78 million during three decades (1977-2007), according to Yahya bin Said al Jabri, former chairman, ODB.
The ODB distributed loans worth RO 35.9 million in 2008 compared to RO 29.9 million during the same period in 2007, registering an increase of 20 per cent. The bank's net profit in 2007 stood at RO 5.9 million compared to RO 3.7 million in 2006. The bank's six-year Strategic Plan (2005-2010) seeks to achieve a net lending portfolio of RO 60 million by the end of 2010. By the end of 2007, ODB's net lending reached RO 32.2 million.
As against the goal of reducing the rate of nonperforming debts to less than 15 per cent of gross loans portfolio by 2010, ODB reduced arrears from RO 21. 2 million (2005) to RO 18.2 million (2006) and to RO 15 million (2007), thus reducing the rate of nonperforming loans to 31.4 per cent in 2007 from 52.2 per cent in 2005. ODB's total number of branches reached 13 with the recent opening of three new branches at Wilayat Al Kamil Al Wafi, Mahout, and Ibri.
In a landmark event, Royal Decree 18/2006 increased the bank's capital to RO 40 million and increased the lending limit to RO one million per loan instead of the hitherto RO 165,000. The bank was allowed, for the first time, to finance working capital with unsubsidised loans. "This has opened a new phase of development finance" as per the Sultanate's vision of a comprehensive development plan for the future, says Al Jabri. Oman's first recent annual SME exhibition-cum-conference emphasised the need for inculcating the spirit of entrepreneurship among Omani youths to set up their own SMEs.
The Directorate-General of SMEs, Sanad Programme, Oman Development Bank, Business Diagnostic Centre, Youth Fund Projects, Intilaaqah, and a proposed PEIE Innovation Centre are all meant for the promotion of SMEs in Oman. SMEs are a major engine of economic growth in developing as well as developed countries. History shows that many of the large conglomerates started as SMEs at one stage. With the digital revolution sweeping the world, SMEs are as capable as the large sector enterprises in reaching out to markets in a global economy.
The quality of entrepreneurship is seen by many economists as an important explanation of differences in the rate of technical progress between countries. Many businesses have come up with the support of the ODB. Said Nasser al Mouini, a young man whose dream was to convert waste into cash, wanted to set up a recycling plant where discarded carton boxes could be transformed into paper again. He received a loan of RO 237,000 from the ODB as a part of the project cost. The Al Mouini Paper Factory set up at Sohar Industrial Estate in 1998 has been operating since March 2000.
Hassan Abdullah al Kamzari launched a fishing business, following a loan of RO 3,200 from Oman Development Bank for purchasing two boat engines and modern fishing equipment. Similarly, Said bin Abdullah al Masroori's car repairing and washing workshop project, and Salim bin Hamad al Hajri's Green Houses project at Al Mintarib are examples of successful SME projects. There are hundreds of success stories of SMEs in Oman in which the ODB has played a key role.
By Hasan Kamoonpuri
© Oman Daily Observer 2009
