The low number of Omanis working in small and medium enterprises (SMEs) is a key challenge to the growth of the sector, a recent study by the Central Bank of Oman highlighted.
The study, which used survey questionnaires targeting a large sample of SMEs as well as commercial banks in Oman, pointed out that the SME sector requires significant reforms in order to grow, be competitive, dynamic and add value to the economy and the society at large.
According to the CBO, 40 per cent of the total workforce is employed in SMEs with less than five per cent consisting of Omanis, while the sector's contribution to the GDP ranges between 15-20 per cent.
The findings show that over 75 per cent of SME owners in Oman are over 30 years old; 70 per cent of those surveyed never received any training; and that 58 per cent of SMEs employ between one to four nationals and only two per cent employ more than 20 Omanis.
The study said that about 10,000 nationals work in the SME sector. “The 10,000 nationals working in the SME sector amount to only two per cent of the total workforce and three per cent of total employees in the private sector in Oman which, when compared to figures in advanced or a number of emerging economies, where over 90 per cent of the workforce participate in the SME sector, amounts to a negligible participation by the national workforce in the sector.”
Another crucial question pertaining to Omani SMEs is the issue of ownership and its implication to the national economy. “Cases whereby nationals are registered as business owners exist whereas in reality, these nationals are simply agents of expatriate owners. This loophole in the current system amounts to rent-seeking behaviour by some nationals and has a number of financial and economic ramifications, among which are rising remittances, pressure in the labour market among nationals, and incentives that are meant to assist nationals in their efforts to start or grow businesses being channelled to expatriates instead.”
Other notable findings include the fact that at least 55 per cent of owners have full-time jobs. The study suggested that in order for the SME sector to thrive in Oman and realise its potential economic and social benefits, owners need to be fully invested in the start-up as well as growth phases of the business.
Access to financing is one of the key challenges facing SMEs in Oman. As many as 56 per cent of firms were self-funded - individually or jointly by family, 20 per cent borrowed from friends, 18 per cent borrowed from banks and financial institutions, ten per cent from Oman Development Bank and four per cent from Sanad, it added.
Established SMEs were the most preferred recipient of financing from banks, with a 86 per cent share, compared with start-ups, at 43 per cent. Lack of financial history or financial statements was identified as the leading obstacle to financing SMEs, followed by lack of business knowledge by prospective borrowers, lack of collateral and inherent failure of SME firms.
The study recommended a legal framework that at its core promotes growth-driven regulations, fair competition, effective agency regulations and makes sure all regulations and rules are based on reliable research.
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