16 February 2017
Muscat: Oman Development Bank, the Sultanate’s leading development bank, has issued 33,643 loans worth of OMR272 million ($706.67 million), as funding for various projects during 2009 to 2016.
In his presentation at the three-day regional seminar on Financing and Developing Small and Medium Enterprises, Eng. Ahmed Al Hajri, Corporate Bank Manager at ODB, said that the loans were issued to various projects across governorates and across diverse economic sectors that added value to the economy.
The seminar, organised by Oman Development Bank (ODB) at the Crowne Plaza Hotel, Muscat, in association with the Association of National Development Finance Institutions in Member Countries of the Islamic Development Bank (ADFMI) and Islamic Development Bank (IDB), discussed the challenges faced by the SME sector in the Islamic world.
Al Hajri said the ODB loans created as many as 79,991 job opportunities for nationals, thanks to the bank’s policy on employing Omani cadres in the projects it finances, and its commitment to the government’s Omanisation plans and encouraging entrepreneurship in the Sultanate.
Meanwhile, the number of microfinance loans during the period reached 32,849 valued at OMR160 million. “This reflects the Bank’s role in supporting micro-projects,” he said, adding, the bank financed 19 big projects worth of OMR18 million, 92 medium projects worth of OMR44 million and 404 small projects worth of OMR50 million.
He referred that the bank’s loan portfolio increased from OMR63 million in 2009 to OMR127 million in 2016, reflecting the bank’s commitment to boost development-finance in the Sultanate, and follow up with the governmental plans that aim at economic diversification in the Sultanate.
The bank’s arrears declined from 24 per cent in 2007 to less than 7 per cent in 2016, due to effective measures and policies. “This is a big success as far as managing small and medium facility loans are concerned. Usually bad debts are a cause of concern for development banks,” he said.
Al Hajiry emphasised that the bank follows cautious approach in giving loans, with a view to enhance the ratio of repayments, which are used to fund other projects.
The challenges to development finance include pre-establishment and post-establishment challenges, he said, and elaborated on them. “Pre-establishment challenges range from lack of feasibility studies, lack of awareness about its importance, imitating projects ideas, lack of experience and skills on part of the investor, shortage of funds for investments, high debts, absence of right planning on the part of the investor, and a lack of knowledge about strategies that can make ventures successful.”
“Post-establishment challenges can be lack of the necessary liquidity to run the project, not keeping proper accounting registers, over-selling without organisation, and the overlapping of bank accounts of projects and personal accounts of the owners. There are also administrative problems including lack of personal dedication to managing the project, low qualification of the management body, labor problems, weak leadership and marketing skills, lack of good plans, publicity problems arising from not studying the market, and lack of experience,” he said.
External challenges facing small and medium facilities include ineffective technical support and counseling services, lack of data bases on markets, poor coordination, duality of roles among specialised parties, limited market and its vulnerability to external circumstances, competition with underhand transactions, and lack of proper cooperation and coordination among big, medium and small project sectors, he added.
Al Hajiry listed the solutions to those challenges, saying, “It is necessary to form business matrixes for the economic activities that include medium and small projects, encourage and motivate the projects and focus on training and qualification — especially for inexperienced entrepreneurs, provide technical support and counseling services, coordinate between the financing parties and other support centers so as to prepare suitable environment for those projects, and establish clear channels of communication.”
He stated that the entrepreneurship sector should focus on research by establishing a specialised research centre so that amendment to the sector’s policies can be effectively formulated. The seminar concluded on Wednesday.
© Times of Oman 2017