Highlighting the strategy in tapping the SME segment, IFC noted that BankMusct had the first mover advantage by targeting Oman’s SME market. “In 2006, when BankMuscat had successfully captured a 40-45 per cent commercial banking market in Oman, the SME opportunity was seized, when no one was targeting the SME sector. Recognizing the opportunity to establish itself as the first Bank to serve SMEs in the country, BankMuscat focused on building knowledge of the sector through market research, including a World Bank study identifying a potential client base of 20,000 SMEs,” the IFC report said.

In coordination with IFC, BankMuscat restructured its SME operations, offering highly structured products to smaller SMEs, and SME Finance, which provides more customized service, to larger SMEs. The Bank is in the process of developing its own credit scoring models.

Abdul Nasir Al Raisi, Head - SME Credit and Marketing Department, said: “BankMuscat is proud to be chosen as the only financial institution from the Sultanate to be highlighted in the IFC guide. This is a great recognition for the important role played by the Bank in promoting SMEs and the resultant economic development of Oman. BankMuscat has always been at the forefront, providing the required support to SMEs in contributing to the GDP as a major source of employment. BankMuscat has been very dynamic in financing businesses and strengthening the SME foundation in Oman.”

The SME Banking Knowledge Guide is a technical publication intended to provide guidance about the optimal way to approach the SME segment. The IFC guide draws on existing research and primary interviews with SME banking experts and practitioners worldwide. It supports financial institutions in making informed choices in operational models.

SME baking is an industry in transition. From a market that was considered too difficult to serve, it has now become a strategic target of banks worldwide. SME banking appears to be growing the fastest in emerging markets, the IFC report said.

Governments around the world now recognize the importance of the SME sector and have worked to support its access to finance. The key to the growth of SME banking may be that banks are starting to understand the particular needs and preference of SMEs and are developing tailored approaches to overcome the historical challenges of high credit risk and cost to serve. Contrary to common perception, the SME market is served by a wide spectrum of banks, not just smaller banks with relationship-based models, the IFC said, adding that leading banks report that more than 60 per cent of their SME revenues come from on-credit products.      

Fostering a dynamic small and medium enterprise (SME) sector is seen as a priority amongst economic development goals in both developed and emerging economies. SMEs are a primary driver for job creation and GDP growth. They greatly contribute to economic diversification and social stability and they play an important role in private sector development, the IFC report said.