Muscat: The commercial banks in the Sultanate seek to diversify their credit activities, benefiting from the growth that different economic sectors have shown.
The statistics released by the Central Bank of Oman (CBO) point out that as of March end, 2014, banking credit rose to OMR15.6 billion, an OMR418 million growth, compared to December 2013 level and OMR1.3 billion compared to the level in March 2013.
Personal loans constitute more than 40 per cent of the total banking credit. Most recently, this witnessed a decline in favour of other economic sectors, such as industry, construction and export, which grew to varying degrees.
During the first quarter of 2014, the loans for the industrial sector rose by OMR1.3 billion, an OMR60 million growth, compared to December 2013 and OMR164.7 million growth compared to its level a year ago.
The loans sanctioned to the construction sector grew to OMR1.6 billion, an increase of OMR92.3 million during the first quarter of 2014 and OMR230 million when compared to its level a year earlier. By the end of the first quarter of this year, the construction sector received 10.1 per cent of the total banking credit, compared to 8.2 per cent for the industry, 8.2 per cent for services and 39.7 per cent for personal loans, marginally less than the 40.1 per cent last December.
The CBO endeavours to limit the expansion in personal loans, so that the level does not rise beyond 35 per cent of the total banking credit as housing loans increased to 15 per cent of the total credit.
The CBO mandated all banks operating in the Sultanate to reduce the ceiling of personal and housing loans to six per cent to increase the credit for production sector as this will enhance other economic sectors and improve the standard of development in the Sultanate.
The CBO also instructed the commercial banks to dedicate at least five per cent of their credit portfolio to the SMEs.
The ratio should be achieved by December 2014.
The procedures are expected to simulate many economic sectors, especially industry, trade, services and construction as they will be able to access the required finance more easily.
At the same time, the banking sector tried to focus on banking services for the companies to keep pace with the modern trend and contribute towards financing the different economic sectors. The measures will also diversify the sources of income of the commercial banks by shifting the focus from personal loans.
In their reports covering the first quarter of 2014, the commercial banks affirmed that they are interested in financing SMEs.