Muscat Finance: Quantum leap

Bikram Rishi, CEO, Muscat Finance

Muscat Finance secured the third rank among the non banking finance companies (NBFCs) in Oman in this year's Business Today-EY survey. The company has shown remarkable recovery in certain sections which helped it to score around 70 more points thus taking overall points to 223 compared to 156 in the previous year's survey in which it was ranked last.

The company exhibited better performance in terms of net profit growth, both in percentage and overall earnings, which helped it to improve its overall ranking. For the financial year ended on December 31, 2016,  it reported a 17.95 per cent growth, highest among all NBFCs, in net profit.

The company's net profit grew to RO5.14bn during the period compare to RO4.36bn in the previous year. Despite improving on most segments, the company wasn't able to score well on parameters such as non-performing loan to total loan ratio and in terms of asset size.

In its annual report, the company said, “The government’s emphasis on diversifying the economy, driven by the Tanfeedh initiative, and the stable oil prices are expected to provide more opportunities for the leasing sector as a whole. We are planning to support the  SME sector with a focus on factoring, warehouse financing and increasing our  focus on LCs and guarantees.”

There is a nervousness in the market due to prolonged softening of crude oil prices that is hampering the economic growth in the country. What are your views on that?

Certainly, Oman’s GDP has shrunk dramatically with the prolonged softening of crude prices. The payment cycles from the government, which is the major engine of the economy has lengthened considerably and this put a brake on

re-investments by the private sector, which is urgently needed to diversify and grow the economy. Perhaps, we could learn from the financial crisis of the US and Europe (2007 to 2010) and inject liquidity into the system to kick-start growth.

Industry captains in country's financial segment often complain that there not enough avenues available for them to invests. Do you agree with this?

We have received a mixed bag of feedback.

Some players feel happy to continue to invest in their existing businesses, and consolidate their position in their respective industry. Other players complain that there aren’t good projects to invest in, or any new project idea becomes unviable if one were to factor in bureaucracy and red-tape.

Recently there was an announcement about the merger of National Finance and Oman Orix Leasing. As one of the most experienced persons in the sector, do you think that this trend will continue in near future also?

Financial institutions benefit greatly from economies of scale. The FLCs are tiny as compared to the banks in Oman and therefore, there is a good reason for consolidation within the industry. However, since all the FLCs are well regulated and capitalised, they may choose to remain independent and pursue strategies that leverage their ability to respond quickly to customer demands.

Ultimately, it is a choice that the shareholders make regarding what they want to make from their institution – large and low cost or small and responsive. Both models will be profitable and viable.

Do you see the possibility of acquisitions and mergers happening in Oman in near future or do you think that there is enough avenues available for more players to enter?

The two alternatives are not mutually exclusive. While some players might choose to consolidate, others may want to enter by offering a differentiated product or service. For example, by offering a more tech-based solution that minimises the requirement for brick and mortar branches or excessive staffing.

Muscat Finance: Quantum leap
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