Finance and leasing firms bring down non-performing loans: CBO

MuscatT: Oman’s finance and leasing companies, popularly known as non-banking finance firms, were able to bring down their non-performing loans last year.
The gross non-performing loans (NPLs) at the end of 2015 fell to OMR49.5 million (by 10.5 percent)from OMR55.3 million a year earlier, according to the latest annual report of the Central Bank of Oman.
The CBO report said gross NPLs at the end of 2015 constituted 4.7 percent of the gross loan portfolio of hire purchase and leasing companies, compared to 5.9 percent in the previous year.
The total combined assets of finance and leasing companies (FLCs) grew by OMR118.4 million or 12.9 percent to OMR1,037.4 million by end-2015 from OMR919 million a year earlier. “The continued thrust on the part of the government on economic diversification and development of SMEs opened up opportunities for diversified growth and further credit outlays,” the CBO report said, adding, “Total outstanding credit (net of provisions) mainly constituting hire purchase financing, lease financing etc. stood at OMR990.6 million at the end of December 2015.”
The FLCs pursued their geographic expansion plans with the number of branches increasing to 40 in 2015. There are currently six finance and leasing companies operating in Oman under the license of CBO. They mainly operate in three market segments - retail financing where the financing is to individual customers, mainly for the purchase of automobiles and electronic goods; equipment leasing where the finance is extended to small and medium enterprises (SMEs) for expansion, modernisation and replacement requirements; and finally for factoring and working capital financing to SMEs for domestic as well as cross-border trade or for the execution of projects usually against the assignment of receivables.
Borrowings from banks and other financial institutions, which are the main source of funding for finance and leasing companies,had increased to OMR640.1 million at the end of 2015. The consolidated capital and reserves of the FLCs rose to OMR251.2 million by end-2015 from OMR232.5 million in the previous year. Net profitof FLCs increased to OMR32 million during 2015, a rise of 8.8 percent over the previous year. With the general softening of interest rates, the weighted average lending rate marginally dropped to 8.9 percent per annum in 2015 from 9 per cent per annum during the previous year.
Finance and leasing companiesin Oman played a crucial role in broadening access to financial services, enhancement of competition and diversification of the financial sector. Keeping in view the importance of FLCs and their contribution to the financial sector, the Central Bank of Oman has been striving to create a environment conducive for them to carve out a specific market niche for themselves. The retail vehicle financing industry continues to be the most competitive segment of the market, apart from SME equipment finance.