NON-BANKING FINANCIAL INSTITUTIONS

Oman 2018 | FINANCE | B2B

With tighter liquidity all around, Oman's finance and leasing companies are a great alternative for financing options.

Robert Pancras
ROBERT PANCRAS
CEO
National Finance Company
Mohammed Redha A. Jawad
MOHAMMED REDHA A. JAWAD
CEO
Taageer Finance

What is the importance of providing credit to SMEs in order to improve the economy?

Robert Pancras In this sector, we have been helping SMEs with loans for the past 30 years. This will be a significant factor in adding value to the country, as credit can help SMEs professionalize. We want them to have the resources to develop their processes, local knowledge, and expertise. In the oil sector in particular we see Omani SMEs competing against multinationals. There is also huge potential for local entrepreneurs to subcontract privately. As their financing partner, we tend to be more asset based. If they have assets with value, such as a manufacturing plant, we are willing to study the case to give them the bulk of the money they need because such assets require huge investment to get started.

What steps have you been taking to become a sector leader in such a short time?

Mohammed Redha A. Jawad Taageer Finance is the youngest company amongst its peers. We have developed a five-year strategy plan to move forward in a systematic manner with a focus on customer service, business development, and the development of our human resources. When we started developing our plan in 2015, oil prices were high and many businesses were performing well within low to medium risk levels. However, with the fall in oil prices, market dynamics have changed, so we have had to adjust our plan accordingly. We will proceed with our plans for investment in our IT system. The Board of Directors is supportive of better customer experience. We are moving carefully at an acceptable pace to book businesses. We are also developing mobile application and credit card products. We want to make sure that customers at the end of the day feel at ease when doing business with Taageer. We also support the SME business within our credit norms.

To what extent will the central bank's bonds help generate liquidity?

RP I have seen the budget, although I am not an expert in this field. The government has a lot of contracts with contractors, and many predate low oil prices. For that reason, a great deal of the liquidity generated goes toward paying off debt. I have been told that the government has begun to get rid of the backlog of those payments. A company may expect to get paid, but interest rates have gone up so the situation is quite difficult for contractors. Everyone has to realize that the country's economy is tight and the transition is going to take time.

MRAJ It is a positive move. Initiatives taken by the government will support the liquidity conditions in banking system as the businesses were impacted due to lack of adequate liquidity in the system. The government and businesses are going through challenging times due to low oil prices. The international rating agencies are also reviewing the impact of lower oil revenues.

What is your current assessment of the financial market in Oman?

RP In the long run, nobody knows what will happen, but in the medium term we have a whole set of positive factors in Oman that will support the growth of both the economy and the financial sector. The working age population over the next decade will grow and is also registering a phenomenal consumption rate. A great deal of the work on the growth in the country has been led by the government, which has focused on construction and developing many big infrastructure projects. Additionally, policies are continuously being revised; hence in the mid term, a sector like finance has great potential to do well in this country. On the other hand, in the short run things are somewhat tough because interest rates are going up, which impacts the demand for capital. Car and home sales are slightly down and we expect that to continue over 2017.

MRAJ In the history of the finance and leasing company (FLC) sector, there has not been any consolidation in the last 30 years, probably due to low benefits. In the banking sector, there are many advantages, whereas the FLC sector has limited scope of advantages. The FLC sector never used to face competition from banks for the past several years. However, from 2013, Islamic banks began operation and started doing asset-based finance, which is the core business of FLCs. We have seven Omani banks and six FLCs in the country, and all 13 entities now target the same products/market, which is why some FLCs are looking at consolidation. Nevertheless, the FLCs sector is strong and will be able to overcome competition and challenges.