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NBFCs in the Sultanate are facing increasing competition from banks and Islamic finance lenders. The market is evolving with many new competitors, Islamic banks, Islamic windows as well as traditional banks. Increased competition is compressing spreads and making everybody work harder to maintain their service propositions. All the six NBFCs in Oman have posted reasonable growth in 2014. Oman Orix Leasing Company (OOLC) was incorporated in 1994 as a joint venture between reputed local and foreign financial institutions including International Finance Corporation (IFC), a member of the World Bank group. The company’s main objective is to provide medium-term asset financing to productive sectors of the economy with emphasis on serving small and medium-size business enterprises (SMEs) as well as lease financing to the consumer sector.

Oman Orix achieved the highest profits and business volume in its history during 2014. The company was proactive in supporting the SME segment, says its CEO Shahin Mohammed Al Balushi. The profit after tax for 2014 was RO4.54 million, which is 23 per cent higher than the previous year. Lease income was RO13.15 million compared with RO10.3 million in 2013, an increase of 27 per cent. The networth of the company has increased to RO32.43 million, compared with RO29.68 million in 2013. The company’s head office is located in Muscat and it has branches in Sohar, Salalah, Nizwa, Ibri and Barka. National Finance is yet another non-banking finance company with two main streams of business- financing business customers and salaried individuals. According to Robert Pancras, CEO, National Finance, the company’s earning assets grew 10.2 per cent to reach RO160.9 million as a result of growth in both business and retail lending. “The challenge is really to maintain the correct balance between risk and return and avoid the temptation of booking higher risk business.” Increased competition is compressing spreads and making everybody work harder to maintain their service propositions, Robert adds.

Al Omaniya Financial Services continues to be the largest non-banking financial institutions in the country, offering diverse financial solutions across the broad spectrum of economy. Aftab Patel, CEO, Al Omaniya Financial Services says the company has grown in the year 2014 by 6.8 per cent in profitability. “We have managed to grow our asset size in spite of severe competition and large base. The growth has been subdued for the year in the retail segment due to intense competition from Islamic banks and commercial banks, who have heavily encroached into auto finance which has been a specialised product of NBFCs so far.” As such, NBFCs are left to deal with residual segment of the market where the quality of credit is unpredictable and not the preferred segment to concentrate on. But the company has extended its product line and reach across all segments and has maintained the asset size in the year 2014. Muscat Finance set up in 1987 has hire purchase financing, equipment leasing, debt factoring, working capital finance and consumer durable finance as it main focus. According to Bikram S Rishi, its CEO, the company had a 11 per cent increase in assets which was the second highest amongst NBFCs in 2014, and above the market average of eight per cent. The revenue increased by 12 per cent over 2013 versus the market average of eight per cent. “We have continued our track record of consistent profits, uninterrupted dividends and set a new record in terms of balance sheet build up and profitability,” he says.

SME focus

Taageer is the youngest firm among the finance and leasing companies (FLCs), having launched its operations in 2001. The company offers various products such as Al Amthal, Al Hal and Al Sahal. Its CEO, Mohammed Redha A Jawad, says 2014 was a reasonable year, where the company posted RO3.883 million net profit after tax. “Competition has become intense since the banking sector has entered our business; they have started financing aggressively to SMEs and offering car finance, as well as equipment finance in the light of banking regulations which stipulate setting aside five per cent of their commercial loan portfolio to support the SME sector.”

The outlook for the future is positive as the government is committed in developing the country’s infrastructure, whereby the need of the hour is equipment financing. There are major contracts on hand running into millions of Omani rials. Successful winning companies split these major contracts into different subcontracts, which are further divided among smaller subcontractors (SME sector). Banks now finance these entities as well because of the five per cent regulation. With fresh graduates entering the labour market and job opportunities for new employments, the consumer spending would increase significantly. The automobile and other consumer sectors would also benefit for growth in economy. Another segment that is now catching up is the market for used cars, as these vehicles are becoming more popular among young people who prefer to spend money on acquiring land to build a house and to meet marriage expenses and so on, adds Mohammed Redha A Jawad.

United Finance Company, registered as a non-banking finance company in the year 1997, commenced business from 1998. Over the years, the company has grown and spread its operations to all major regions of Oman and presently has a network of seven branches. Mansoor Mubarak Al Amri, CEO of UFC says the company performed well during 2014. The company registered a net profit of RO4.96 million as against RO3.64 million in the previous year despite the competitive market conditions.


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