Omani SMEs still face hurdles in accessing banking credit

MUSCAT, NOV 17

The small and medium enterprise (SME) sector plays a critical role in Oman’s economic vision, fueling job creation, innovation, and sustainable growth. For an economy that aims to diversify beyond oil dependence, fostering a robust SME ecosystem is essential. Recognizing this, the Omani government has introduced a variety of initiatives to support local entrepreneurs in launching and growing businesses, emphasizing the need for accessible financing and streamlined regulatory support.

Yet, as highlighted by Sultan al Mahrouqi, a municipal council member representing the Wilayat of Adam, bureaucratic obstacles in securing financial support – particularly through the Development Bank – continue to impede the progress of Omani SMEs.

Al Mahrouqi’s statements, articulated in recent social media posts, underscore a growing disconnect between the government’s strategic goals and the on-ground realities facing SME owners. Although the government has recognized the value of SMEs in driving economic diversification, entrepreneurs are still facing significant roadblocks when attempting to access vital funding. Bureaucratic inefficiencies, convoluted requirements, and delays within the Development Bank’s loan approval process pose substantial challenges. Such obstacles not only slow down the initiation of projects but also create financial strain on entrepreneurs who must wait months to access the capital they need. Addressing these issues is paramount if Oman is to cultivate a vibrant, entrepreneurial economy, he stressed.

One of the primary issues identified by Al Mahrouqi is the complexity and length of the application process for Development Bank loans. Entrepreneurs frequently encounter a long list of procedural steps, conditions, and fees, all of which add significant time and cost to the financing process. For many SME owners, particularly those in early stages, these conditions can be overwhelming and detract from their ability to focus on developing and executing business plans. The extensive procedural requirements also disproportionately affect small business owners who may not have access to the resources or expertise needed to navigate such a demanding process.

Beyond the application process itself, Al Mahrouqi points out that applicants often face repeated requests to modify their submissions, even after meeting the bank’s initial requirements. Such demands, often inconsistent and stemming from unclear guidelines, introduce unnecessary delays.

Even after a loan is approved, entrepreneurs report prolonged delays in the actual disbursement of funds. According to Al Mahrouqi, these delays can extend to several months, often without explanation. Such postponements are particularly challenging for SMEs, where timely access to capital is critical for maintaining cash flow and meeting operational needs.

Al Mahrouqi stresses that once collateral is secured, funds should be made available without further delays. The extended wait times contradict the Development Bank’s advertised commitment to processing loans within a three-month period, creating a mismatch between official timelines and the experiences of loan applicants.

The challenges facing applicants are further compounded by the burdensome nature of client interactions. Al Mahrouqi highlights how entrepreneurs are often required to visit the bank multiple times to follow up on their applications, an exhaustive process that distracts from their business responsibilities. Instead of feeling encouraged and supported, many applicants feel as though they are navigating a system designed to test their persistence rather than one aimed at facilitating business growth.

In light of these issues, there is a clear need for the Development Bank to reform its internal processes to align with the government’s vision for an SME-driven economy. Streamlining the application process, clarifying criteria for approval, and ensuring consistent communication from staff are essential steps to reduce administrative burdens on applicants. By creating a clear, predictable process, the bank can help SME owners move more confidently through the financing journey, allowing them to focus on building and expanding their businesses.

Additionally, the Development Bank should improve transparency in loan disbursement timelines. Entrepreneurs require accurate information about when they will receive funds, especially when their personal assets are already at stake. Setting realistic expectations and adhering to promised timelines will foster greater trust and enable entrepreneurs to plan more effectively.