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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Oman banks urged to do more to address woes of private firms

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MUSCAT, FEB 22 - The Oman Chamber of Commerce and Industry (OCCI) exhorted banks and financial institutions in the Sultanate to show greater flexibility and consideration to the plight of private businesses, as well as small and medium enterprises (SMEs), weighed down by outstanding loans, liquidity challenges and steep funding costs.


The considerable woes of the private sector were laid bare at an ‘Economic Evening’ hosted by the OCCI at Majan University College on Wednesday. It was held under the auspices of Shaikh Abdullah bin Salim al Salmi, Executive President of the Capital Market Authority (CMA), while the panellists comprised Taher bin Salim al Amri, Executive President of the Central Bank of Oman (CBO); Ahmed bin Ali al Maamari, Vice President for Insurance, CMA; Murtadha bin Mohammed al Jamalani, Chairman of OCCI’ s Financial & Insurance Committee; Ali Hassan Moosa, CEO — Oman Banks Association; and Shaikh Salim al Siyabi, Chairman —Al Siyabi Group. The deliberations were moderated by Dr Ahmed Said al Kashoob, Chairman — Omani Securities Association.


Setting the tone for the evening’s discussion, which focused on the theme, ‘The Omani Banking Sector’s Role in Economic Stimulus’, Badr bin Saif al Aufi, Economic Adviser at the OCCI, urged local banks to come to the aid of private companies and SMEs that are saddled with non-performing loans and other challenges amid the ongoing economic downturn.


Access to cost-competitive bank credit, said Al Aufi, remains a challenge for many private businesses and SMEs as well, given that banks allocate up to 40 per cent of their loan portfolio for personal loans.


Investment loans sought by private businesses should be given priority over personal loans, he stressed, noting that the former category are more likely to stimulate economic growth than the latter.


The Economic Adviser also lamented the demand for collateral amounting to as much as 200 per cent of the value of the requested loan amount. Applicants are asked to either offer up their real estate holdings against loan applications or pledge company stocks up to 200 per cent of the loan amount.


Al Aufi also urged banks to make a distinction between companies that, on the one hand, are unable to settle their loans primarily because they are owed sizable amounts themselves against services and contracts rendered to public sector clients, and on the other, those that are in default for other reasons.


The former category, he said, deserve to be treated with some consideration because their inability to settle their loans is not of their own making. Rather than be blacklisted, as banks are wont to do, these defaulting firms should instead be assisted in having their loans rescheduled or restructured, with interest rates suitably lowered in consideration of their difficulties.


SMEs, he said, were particularly at a disadvantage when seeking bank credit for their projects. They are typically faced with demands for collateral, charged relatively high interest rates, and subject to all kinds of complications.


In this regard, he mooted the creation of a one-stop shop for SME lending, which brings of the funding agencies, including Riyada and Oman Development Bank, together with commercial banks, under one roof in processing loan requests from SMEs.


Also being discriminated against are employees of SMEs when they approach local banks for personal loans, he said. Banks are averse to sanctioning personal loans for such employees, with the result that the latter then resign and join the employment of larger firms, much to the detriment of the SMEs, he noted.


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