Scope for new funding agencies to help small units

Muscat: There is room for the establishment of one or two more funding organisations to fill the existing gaps in supporting small and medium enterprises (SMEs) in Oman, said an official from Sharakah.
Every SME has unique needs, all of which may not be served by Sharakah or any other organisation, Abdullah Al Jufaili, general manager of Sharakah, told the ‘Times of Oman’.
That is the reason why Al Jufaili said he did not see a new venture capital company called, ‘Ethmar’ or any existing or upcoming organisation supporting SMEs as a competition. They play a complementary role as the services of funding organisations may be different in terms of investment amount, investment income, schemes, process and requirements, he noted.
According to him, Sharakah’s door is always open to all organisations that would like to work with the company. Sharakah has co-financed in the past and would not mind doing it again and again, the official explained.
Al Jufaili said given the size of the market, the establishment of just one or two more funding organisations could help add the missing links in the chain of supporting SMEs in the Sultanate and provide more options for entrepreneurs.
Existing gaps
He noted that according to Sharakah’s latest observation, one example of the existing gaps is related to the situation where an Omani, who is currently working at an organisation, does not have any investment to contribute and would like to get financial support to start a business.
“He would only have one option in a way to take a personal loan from a bank and offer his salary as security,” Al Jufaili stated. If he approaches some funding organisations, he may be told that he needs to quit his job because they would not be able to finance him as long as he is employed somewhere else, he added.
Some other organisations would tell him that he has to contribute an investment amount otherwise he cannot receive financial support, Al Jufaili said. So this is one example of the existing gaps in supporting SMEs, which needs to be filled, he noted.
SME loans
Al Jufaili also commented on a stipulation by the Central Bank of Oman (CBO) that commercial banks’ loans extended to SMEs must account for at least 5 per cent of their total loans. It is challenging for the banks to meet the 5 per cent target, he said, adding that there should be an agreement between the definition of SME used by the banks and the authorities.
Also, banks offer different financial packages that contribute to SMEs, which may not be taken into consideration if the authorities only look into the loan portfolio, Sharakah’s general manager stated. Al Jufaili believes that either the 5 per cent target should be revised or a mechanism should be developed to take into account banks’ other contributions to SMEs. In general, it is a challenging situation, he noted.