Opinion Banking & Finance Oman must empower SMEs by removing banking barriers The country has much to gain from supporting its entrepreneurs with easier access to funding By Saleh Al-Shaibany October 7, 2024, 10:51 AM Arie Storm/Alamy via Reuters Connect A tailor at work in his shop in Muscat, Oman. Research found that many small and medium businesses in Oman need more training in entrepreneurial skills and financial management Banks in Oman need to ease barriers to lending to owners of small and medium-sized enterprises (SMEs) to make it easier for them to access funding. According to the Small and Medium Enterprises Development Authority, 141,126 businesses had registered as SMEs in Oman by June 2024. But most of them struggle when they want to access loans from banks. Central Bank of Oman figures show that in the last three years local banks granted only 36 percent of the loans applied for by SMEs. The risk of lending to smaller companies is obviously putting banks off from extending financing. SME owners see the main obstacle as the requirement from financial institutions to provide a significant amount of financial data for due diligence purposes. Local banks insist on seeing evidence of the SMEs’ financial transactions to determine creditworthiness and the ability to repay loans. However some SMEs, due to a lack of experience and short track record, may not have the financial data to hand. To help solve the problem, government intervention is needed. Entrepreneurship academies need to be established for potential SME owners to learn essential skills The Central Bank of Oman must introduce open banking. This is a system whereby third-party vendors check the transactional history of SMEs. This way, local banks can easily check the accounts of small business clients to make sure they can pay back loans. Open banking is not new in the Gulf Cooperation Council (GCC). Bahrain started it in 2019, while Saudi Arabia has implemented it since 2022, Qatar introduced it in May 2024 and the UAE is introducing a scheme this year. Research in 2023 by the Modern College of Business and Science, a private university here in Oman, also provided evidence on another facet of the difficulties faced by SMEs. It said there is a need for more training in entrepreneurial skills as well as financial management and that many owners of SME startups are fresh graduates who lack experience in business management. This is a common issue in other Gulf countries. Effective entrepreneurship academies need to be established for potential SME owners to learn essential skills. GCC governments also need to give priority to SMEs by reserving some contracts to them when awarding tenders. Perhaps Oman and other GCC countries need to learn from Europe where SMEs form the backbone of the continent’s economies. In the EU, two-thirds of employees work for SMEs. To tap into the EU experience, Oman and the GCC countries need to pay more attention to both startups and established SMEs. Omani banks look to state spending to boost credit growth Omani banking sector ripe for further mergers Saham Agricultural City will offer Oman farmers a lifeline The GCC must also encourage SMEs to trade cross-border within member countries, introduce business friendly legislation, overcome financing hurdles and encourage research and innovation. These revised policies will sustain SME businesses in the long term and help owners to survive and flourish. This in turn will stimulate employment and improve gross domestic product. With these improvements in place financial institutions will be encouraged to lend money and give SMEs much-needed access to credit to expand the economy, both in Oman and the GCC as a whole. Saleh Al-Shaibany is a journalist and lecturer, and CEO of AlSafa Press & Publishing