Oman's central bank has stipulated that commercial banks' loans to small and medium-sized firms must account for at least 5 per cent of their total loans, in a new rule aimed at easing unemployment.
Oman's central bank sets minimum target for SME lending
Oman's central bank has stipulated that commercial banks' loans to small and medium-sized firms must account for at least 5 per cent of their total loans, in a new rule aimed at easing unemployment, a circular showed on Thursday.
Supporting small firms is a key part of the government's policy for tackling high unemployment, which has been the trigger for unrest in other parts of the Middle East and sparked small protests in Oman in 2011. Unemployment in the Gulf Arab country is running at more than 24 per cent, according to the International Monetary Fund.
"The lending of a licensed bank to SMEs shall not at any time fall below 5 per cent of its total credit portfolio," the central bank said in a circular posted on its website.
"Banks shall achieve this target before the end of December 2014, planning for systematic progress. Banks, which have more than the stipulated share, shall not slip back and shall increase their credit further," it said.
Growth in bank lending hit a 22-month low of 10.9 per cent in February, latest central bank data showed.
"Banks shall also note that going forward the central bank may consider raising the minimum target beyond 5 per cent," the circular, dated May 6, said.
Central Bank executive president Hamood Sangour al Zadjali last month urged bankers to accelerate credit flow to small firms.
Banks in the small non-OPEC oil exporter will be required to report SME lending on a monthly basis, beginning from June 2013.
In February, Oman's consultative Shura Council approved a much higher minimum wage and curbs on foreign labour. Oman is keen to move more citizens into private sector jobs in preparation for a fall in oil revenue, seen as possible later this decade.