BOOSTING SME funding.
Summary: Sharakah introduces some changes in funding scheme by increasing the fund limit to RO350,000, in addition to reducing the interest rate and increasing the credit period for its bill discounting scheme that the process of getting reimbursed for services rendered to some large organisation may take up to three months. We have also reduced the interest rate for this scheme."
Fund for Development of Youth Projects (Sharakah) has recently announced some changes in their funding schemes, increasing the fund limit from RO200,000 to RO350,000, with effect from July 1, 2017. Few other changes have also been introduced, including a reduction in the interest rate and increase in the credit period for the bill discounting scheme.
Says Abdullah Al Jufaili, general manager of Sharakah, "Every year we conduct an online survey asking our clients to share their opinion about Sharakah's services. Increasing the fund limit has been one of the suggestions that was repeatedly proposed by SMEs. In addition, we maintain data of all applications that we receive. These data include reasons for not awarding financial support for any application and we have come across many SMEs that require more than RO200,000."
He added that the decision was taken, considering also the ongoing changes in the market scenario. "Setup cost which includes building the infrastructure, purchasing machinery and equipment and pre-operative costs have increased. Some costs have increased due to inflation and others due to change in certain regulations. Moreover, the government via Tanfeedh initiative has identified the manufacturing sector as one of the sectors that needs further support to diversify the economic resources. We would like to ensure that we accommodate the financial requirements of the manufacturing sector by increasing our fund limit."
Talking about other changes that Sharakah is introducing, apart from the increase in fund limit, he added, "We would like to allocate more time and resources on existing businesses. There are a number of them who have been operating in the market for more than three years and have potential to grow. Such companies provide services to larger organizations and need to main a positive cash flow. To support the growth of such companies, we have increased the credit period for our bill discounting scheme from 90 days to 120 days. We understandthat the process of getting reimbursed for services rendered to some large organisation may take up to three months. We have also reduced the interest rate for this scheme."
Further, the minimum amount for financial support has been increased to RO25,000 from what was RO10,000. "Our focus will be more on small to medium size enterprises as oppose to micro businesses," he concludes.
Sharakah's financial services come in three different schemes: equity, bill discounting and term loan. The equity scheme is certified by the Ministry of Endowment and Religious Affairs to comply with Shariaa. The bill discounting is an annual credit limit provided to existing businesses to maintain a positive cash flow. A term loan is given to both existing and startups to assist them with their setup cost as well as operational expenses.
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