How are Omani SMEs contributing to the economy of the Sultanate, and how is the Al Raffd Fund supporting them?
The SME sector represents about 90% of the private sector in Oman, and about 14% of its GDP. We are seeing the potential for slow, but increased growth over the next decade. The Al Raffd Fund will provide financial support to youth to start and improve their businesses. The Fund launched its first financial programs in January 2014; the current four financial programs are: Mawred for those benefiting from social insurance; Tasees for job seekers willing to start their own businesses; Riyada for entrepreneurs, rural women, craftsmen, and business incubator beneficiaries; and Tazeez for those who benefited previously from our programs. We are about to launch our new identity, as well as financial programs and services to meet the requirements of different SMEs, because we understand that the Fund needs to be structured like a bank. We need to automate more systems here, such as IT being integrated into the Fund and the Public Authority for SME Development (PASMED).
Many start-up businesses fail in Oman because of undercapitalization and poor financial resources. What is your offer to support SMEs?
We have project managers and fully dedicated teams handling portfolios of different beneficiaries, and their job is to open doors by providing gateways to government entities and contracts. One of the decisions of the SMEs National Symposium, which was held in 2013, was to allocate 10% of government tenders and contracts to local SMEs. Such a decision will have a major and positive impact on the SME sector in Oman. We follow our beneficiaries once they get financing from Al Raffd Fund for three years, checking their progress every three months to ensure their projects are being managed and run in a proper manner. We need to redefine the SME. Today's definition focuses on two elements: number of employees and turnover. Al Raffd Fund believes that there needs to be a foundation first to be successful, because you cannot know your turnover if you do not maintain and keep your business accounts. Today, the only record of companies we have is through their financial statements from their bank accounts.
Moreover, the government assists SMEs with research, marketing, and branding. PASMED has trained 400 candidates in different fields related to entrepreneurship and SMEs development, including finance, marketing, technical issues, and management. Our training covers challenges faced in the market, such as current competitors, obstacles, and financial management. Everything is done for a new project, with the support of PASMED. Once the applicant is capable to run his or her business, the Al Raffd Fund takes over; different financial program schemes are available. We have $280 million, which will be increased by 10% annually. An entrepreneur simply has to come to our committee and convince them of his or her idea.
The committee approved 269 candidates in 1Q2014, with each project receiving OMR30,000, on average. The first impact of the fund is to create and promote employment for citizens and young Omanis, because one of the conditions for receiving the funds is for the entrepreneur to be fully employed and dedicated in his or her own enterprise. The second part is that we have a target to increase Oman's GDP by nearly 25% over the next 10 years. As mentioned earlier, one of the outcomes of the symposium was 10% of the tenders values from government contracts should be given to entrepreneurs. This comes out to around OMR180 million for 2014. The worst-case scenario is if we are given OMR500 million, imagine how the economy will grow?