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| 20 March, 2017

Omani banks lure customers with saving schemes

Image used for illustrative purpose.

Image used for illustrative purpose.

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Savings schemes with cash prize draws have not lost its lure as banks continue to enjoy steady deposit growth.

Motivating people to save in an environment of cradle-to-grave social welfare system is not an easy task. Moreover almost negligible attraction towards interest income from a large section of the society made the task even harder for banks in Oman. Banks, like their counterparts in any other country, needed customer deposits to fund credit growth. So they managed to do this uphill task quite effectively by introducing a variety of periodical cash prize draw schemes.

These schemes allow savings bank account holders with a local bank to get a chance to avail prize money ranging from as low as RO100 ($260), for which draws are held almost every week, to as high as RO1mn, the draws for which are held annually.

“Our intention is to promote the concept of saving, even if it means starting small and nurturing those savings to help our customers realise their bigger goals and aspirations,” says Lloyd Maddock, chief executive officer at Ahlibank.

The most important aspect of these saving schemes is that they are for everyone. There are no discrimination between nationals and expats. “The scheme is targeted to accommodate all nationalities and segments including ladies, youth, children, high savings balance customers and salary account holders, thereby creating a strong savings habit among citizens responsible for the future development of Oman,” says Abdullah Tamman al Mashani, deputy general manager – Institutional Sales and Products Development, Bank Muscat.

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The beginning

Modern banking era in Oman started around 45-50 years ago. At that time the sector was mostly dominated by foreign banks and they didn't get much deposits. Gradually local banks started becoming prominent and a need to mobilise local deposits became necessary. However, it wasn't an easy task to do.

“Before savings schemes were introduced in Oman, banks tried to encourage deposits through various schemes including interest bearing savings accounts which did not receive a lot of public acceptance due to various cultural and religious reasons. Later on, banks introduced innovative and attractive cash prize schemes to encourage savings, which received positive interest in the society to deposit money in savings accounts,” says Rashad Ali al Musafir, Deputy CEO of Oman Arab Bank (OAB).

He says that deposits started growing rapidly after banks started such schemes. Now these deposits account for a significant share of the total conventional deposits that banks have.

Agreeing to this, Faisal Hamad al Wahaibi, chief retail banking officer at Bank Dhofar, says “These schemes were introduced to encourage everyone to save and to build a saving habit. Customers can fulfill their aspirations by saving and getting the rewards.”

Initially when these schemes were introduced, cash rewards were not part of it. Over the years, these schemes have evolved in many ways to attract more customers.

“We started rewarding our customers with vehicles and other rewards such as shopping, gifts vouchers, pre-loaded fuel cards, and more with increased frequency and going so far as to offer a new car every day for an entire month. The last of these types of saving schemes took place in 2009,” says Khamis Masoud al Rahbi, senior AGM retail and acting head retail banking, Bank Sohar. He says that from 2010 onwards these types of rewards were replaced with high value cash to incorporate large number of winners across a wider segment.

According to John Chang, general manager-chief retail banking officer at NBO, research shows that Omanis need to save more of their earnings for a rainy day or their retirement to ensure they are not exposed to unforeseen events. The importance of having a safety net in case of an emergency cannot be overstated.

“NBO launched Al Kanz with this in mind, over the years the product has become hugely popular,” says Chang.

Diverse schemes

Almost all banks have launched various schemes to attract deposits from retail investors. Bank Muscat has al Mazyona, which is its flagship savings scheme. The bank plans to offer around RO10mn prize money for 2017, probably the highest among all the schemes announced by various banks.

“For over 25 years, al Mazyona has been rewarding numerous customers and enriching their lives,” says Mashani while adding “Over the years al Mazyona has succeeded in inculcating a strong savings culture in Oman.”

NBO has Al Kanz as its flagship saving scheme. It also offers Mustaqbil accounts which is specifically designed to make it easier for  younger customers aged 18 to 25 to achieve their saving goals and secure their futures.

“Al Kanz is significant within the sultanate, as it was the first savings scheme in Oman to offer customers the opportunity to become a millionaire, whilst highlighting the importance of financial planning and security,” says Chang.

Bank Sohar has recently announced a revamp in its Al Mumayaz saving scheme. Khamis says, “ With the Al Mumayaz saving schemes for 2017, our aim is to offer a higher frequency of draws spread across the broadest possible spectrum of our customer base. As a result, we ended up with a scheme that offers a total 1,350 prizes spread across seven distinct types of draws covering all customers segment of the bank on a frequent basis.”

Ahlibank has MyHassad saving schemes. Maddock says, “This year ahlibank has launched MyHassad 2017. The new scheme is designed to encourage customers to enrich their portfolio and promote savings.”

Similarly OAB has a scheme named Hassad in which it gives prizes ranging from RO100 to RO50,000.

Bank Dhofar also has a scheme under which gives rewards to its customers across different locations. “Uniqueness of our saving scheme is that we are making sure that they are fairly distributed in all locations and not just concentrated in big cities,” says Wahaibi.

Strong attraction

Over the years, Oman's financial market has grown bigger in volume and many new avenues have come up for investments but the attraction towards these schemes still remain strong among masses.

“With the growth in Oman's population, the income level has also risen resulting in a growth in the banking deposits. So despite having alternative investments and other financial instruments, banks' conventional deposits continue to steadily grow,” says Musafir.

Over the last three years, Islamic finances have gained momentum in the country but people's love for these schemes hasn't been much impacted. Most bankers believe that the introduction of Islamic finances have helped bringing in those people who because of religious beliefs have remained outside the banking system.“Islamic finances have helped in bringing more people under the fold of the banking system without denting the base of conventional banking customers,” says Wahaibi.

Another important feature of these schemes are that the masses have great faith in the fairness of these draws and no major allegations of manipulation have ever surfaced.

According to Musafir, “The banking regulator is very vigilant about these schemes, and from time to time, they issue guidance to ensure fairness and transparency of draws and to ensure that draw systems and procedures used are audited to gain public confidence.”

Newer additions

As the schemes became popular, banks in Oman started extending and adding newer variants to encourage savings habit among the masses.

“We have consistently endeavoured to encourage the habit of savings. We have done so by offering tips on savings, promoting the habit through our social media channels, organising contests to spread awareness on the concept, promoted it through various events such as roadshows and even launched a calendar in the past that promoted the habit of saving and the benefits it provides,” says Rahbi.

He adds, “This year Bank Sohar is introducing three new weekly draws, including a children’s draw, where five minor accounts holders each will win RO100, general draw of  RO1,500 for two winners, and an exclusive weekly draw of RO5,000 specifically for the bank’s customers who maintain high value account. This will take place in addition to a monthly draw specifically for children where one minor account will win RO1,000.”

According to Maddock, Ahlibank has been consistently launching new products which have been created for the customer's convenience and to make banking an enhanced experience for them.

He says, “This year, we revamped our offering of the MyHassad saving scheme. The new saving account prize draw will provide the winner with a chance to win 'Salary for Life'.”

Low oil price impact

Most bankers agree that as a result of the steep decline in crude oil prices, income growth of most consumers have declined which has resulted in the slow down of conventional deposit growth.

As per data from the Central Bank of Oman, the country's conventional deposits growth in 2016 fell to 2.1 per cent to RO18.25bn against 3.4 per cent in the previous year.

Musafir says, “As income growth levels have slowed down over the past months along with the decline in crude oil prices, the growth rates in bank deposits have also softened. We need to encourage the population to save more during troubled times.

“I am confident that the situation will improve going forward given the various initiatives undertaken by the government and the private sector.”

Despite depressed economic sentiments, most of the bankers agreed that there is a need for continuing with these popular schemes as savings rates in the sultanate and in the whole GCG region are still very low compared to other markets.

However, most bankers are of the view that introduction of saving schemes is not enough to attract deposits. Banks now have to offer other amenities such ease of doing business, mobile phone banking and other technologies to retain customers in the long run. 

© Business Today 2017