Financial institutions and Oman economy
One of the fundamental reasons for the existence of financial institutions is to facilitate the movement of funds and ensure their allocation based on economic rather than political considerations
Published: 05:01 PM,Jan 18,2024 | EDITED : 09:01 PM,Jan 18,2024
My interest in reaching into this subject was sparked following a productive business discussion held last night in the office of an Egyptian entrepreneur and educationist. Our dialogue, spanning fifty to sixty minutes, centred around the role of financial institutions in Oman, raising pertinent questions. What optimal role should financial institutions play in Oman? How do they contribute to fostering a healthier economy in the country? What insights can Oman's financial institutions glean from the progress of their counterparts in other nations? Is it viable for Omani financial institutions to extend loans for business projects with minimal security? When considering personal versus commercial loans, which option would be more beneficial for Oman and its financial institutions? The final query pondered the very existence of financial institutions.
Another motivation for exploring this subject arises from my role in teaching financial institutions at the college level. The profound academic experience of preparing for sessions every two days and engaging with college students serves as a catalyst for this endeavour. Encouraging students to delve into real-life business scenarios in Oman proves to be an effective technique in preparing them for the challenges of tomorrow.
The subject's literature emphasises the necessity of a robust financial system for cultivating a healthy and vibrant economy. This involves the efficient movement of funds from savers to individuals with productive investment opportunities. The crucial question arises: How does the financial system ensure that hard-earned savings are channeled towards these opportunities? Economically, a country's stability and economic growth hinge significantly on its financial sector. Financial institutions, encompassing banks, credit unions, insurance providers, and investment firms, act as intermediaries between savers and borrowers, directing funds to areas of utmost importance.
Referencing Shubik (1990), it is asserted that in a one-period exchange economy with ample but unevenly distributed money, and an optimally efficient bankruptcy law, effective trade can be achieved through a loan market with a zero-interest rate. This underscores the importance of allocating funds appropriately, systematically, and economically.
However, a prevalent issue with financial institutions is the inadequate distribution and the absence of a clearinghouse, as highlighted by Amir, Sahi, Shubik, and Yao (1990) and Sahi and Yao (1989). They argued further that, even in binary markets where every good is considered money, distribution problems persist. Two strategic market game models exist, differing in the presence or absence of a clearinghouse.
One of the fundamental reasons for the existence of financial institutions is to facilitate the movement of funds and ensure their allocation based on economic rather than political considerations. This approach aims to reduce the poverty ratio in the country.
Another motivation for exploring this subject arises from my role in teaching financial institutions at the college level. The profound academic experience of preparing for sessions every two days and engaging with college students serves as a catalyst for this endeavour. Encouraging students to delve into real-life business scenarios in Oman proves to be an effective technique in preparing them for the challenges of tomorrow.
The subject's literature emphasises the necessity of a robust financial system for cultivating a healthy and vibrant economy. This involves the efficient movement of funds from savers to individuals with productive investment opportunities. The crucial question arises: How does the financial system ensure that hard-earned savings are channeled towards these opportunities? Economically, a country's stability and economic growth hinge significantly on its financial sector. Financial institutions, encompassing banks, credit unions, insurance providers, and investment firms, act as intermediaries between savers and borrowers, directing funds to areas of utmost importance.
Referencing Shubik (1990), it is asserted that in a one-period exchange economy with ample but unevenly distributed money, and an optimally efficient bankruptcy law, effective trade can be achieved through a loan market with a zero-interest rate. This underscores the importance of allocating funds appropriately, systematically, and economically.
However, a prevalent issue with financial institutions is the inadequate distribution and the absence of a clearinghouse, as highlighted by Amir, Sahi, Shubik, and Yao (1990) and Sahi and Yao (1989). They argued further that, even in binary markets where every good is considered money, distribution problems persist. Two strategic market game models exist, differing in the presence or absence of a clearinghouse.
One of the fundamental reasons for the existence of financial institutions is to facilitate the movement of funds and ensure their allocation based on economic rather than political considerations. This approach aims to reduce the poverty ratio in the country.