Muscat:Oman’s SME Development Fund (SMEF) has raised OMR20 million corpus in two tranches so far, out of its total envisaged corpus of OMR100 million. Also, the fund has financed 160 projects by deploying OMR15.8 million, which indicates an average funding size of OMR100,000 per project, according to a top-level official of SME Development Fund.
Apart from providing leasing, project finance and working capital to SMEs, the fund also supports them through their nurturing programme, comprising accounting support, monitoring, free software support and mentoring services. KPMG and BDO have been contracted to provide these services at the best international standards, Raphael Parambi, chief executive officer of SME Development Fund, told Times of Oman. Eligible SMEs benefit from interest subsidies, which are provided by SMEF through a grant through the country’s offset programme.
SMEF is supported by the Oman Authority for Partnership for Development, which provides the grants under the offset programme. In addition to interest subsidies, these grants are used for developing a culture of entrepreneurship among college students, training MOD personnel in entrepreneurship, running the nurturing programme and in providing advocacy for SMEs.
Elaborating on the success of the fund, Parambi said that there has been only one failure among those small enterprises supported by the fund. “However, things will change in 2016, as some firms may lose their contracts (due to the slump in oil prices),” he added. The SMEs involved in providing supporting services for upstream oil field development and infrastructure projects will be affected. However, those firms that are engaged in the logistics sector and maintenance of infrastructure projects will do well. “We are also seeing a lot of entrepreneurs entering the hospitality sector. We are particularly focused on the key sectors identified by the government for development, such as in-country value, tourism, logistics, and manufacturing, which constitute a majority of our portfolio.”
Parambi said that the instruction to offer 10 per cent of government contracts to small units is a challenge. “These large contractors are finding it difficult to find good quality SMEs. We are working with them to facilitate (interaction between large contractors and small units),” he noted.
After holding an inter-active meeting, SME Development Fund plans to conduct two to three similar meetings between large contractors and small and medium enterprises. “We plan to invite 50 large firms and government departments, and 100 small and medium enterprises, for an exhibition in November. This will give both sectors an opportunity to interact with each other to develop and showcase opportunities for cooperation. This will be in coordination with Public Authority for SME Development.”
Although the government has allowed public sector employees to start SMEs, people are not coming forward because they do not know how to develop a small unit and how to manage risks.
Parambi added that the contribution of SMEs in the Sultanate’s gross domestic product is estimated in the range of 13-14 per cent. However, the average contribution of SMEs in GDP across the world is between 55 and 60 per cent. “If we can tap this sector effectively, we can cover a large part of the adverse economic impact of the expected decline in the oil and gas sector.”