Between Risk and Growth: Challenges in SME Financing for Omani Lendors

Abstract

Purpose: The purpose of the study was to examine the challenges encountered by commercial lenders in extending finance to SMEs in Oman and to identify the SME-related factors that hinder access to finance from commercial lenders.

Design/methodology/approach:  This study adopted a qualitative research approach. The target population for the study comprised financial institutions operating in Oman that provide credit facilities to SMEs, including commercial banks and specialised lending entities. A purposive sampling technique was employed.

Findings: The study finds that lending institutions in Oman face significant challenges in financing SMEs due to stringent documentation requirements, insufficient collateral, irregular cash flows, and weak financial records. While SMEs primarily seek working capital and term loans, banks remain cautious, viewing them as high-risk clients. Lenders mitigate these risks through preventive measures, monitoring, loan restructuring, and advisory support.

Research implications: The research highlights the need for more inclusive credit assessment models and tailored lending practices. By integrating alternative data sources and adopting risk-sharing mechanisms, financial institutions can expand credit access while maintaining portfolio stability.

Social implications: Improved SME financing can stimulate entrepreneurship, create jobs, and support Oman’s economic diversification under Vision 2040. Addressing financing constraints will empower SMEs to sustain growth, enhance community development, and contribute more effectively to the national economy.

Originality/Value: This study provides fresh insights into SME financing challenges from the perspective of Omani lenders, an area with limited prior research. It contributes to the literature by linking lender risk perceptions with practical strategies to improve SME access to credit.