Omani banks allowed to consider one per cent of non-funded credit for SME funding

Muscat: Omani commercial banks can consider their non-funded credit to the extent of 1 per cent as part of the compulsory 5 per cent minimum credit for small and medium enterprises (SMEs).
Non-funded credit is extended by commercial banks to small units by way of letters of credit (LCs) for imports or guarantees for government projects.
The Sultanate’s banking regulator, the Central Bank of Oman, had asked commercial banks to extend a minimum of 5 per cent of their total commercial credit to small and medium enterprise (SMEs) a couple of years ago, in an attempt to support the growth of small industries.
“In order to encourage banks to provide non-fund based credit, too, to the SME segment and, at the same time, to avoid a possible lack of focus on funded credit, it has been decided to allow banks to reckon non-funded credit up to a maximum of 1 per cent of total credit for the purpose of monthly/quarterly reporting in respect to the set 5 per cent target,” the CBO said in a circular. This will become effective from June this year.
The apex bank also said that commercial banks should be appropriately diligent in classification and record keeping of SME credit, with no scope for “dilution or mix up with personal, or other non-SME business loans and the like.”
The average SME lending by banks in Oman was roughly 2 per cent last year. The 5 per cent credit stipulation is significantly helping 91,000 SMEs in the country.
Presently, Omani banks can lend to a maximum of 35 per cent as personal loans and 15 per cent of their total loan portfolio as mortgage financing.