Omanis bypass banks to get credit from the community

Zakia Al Harthy needs a master’s degree to apply for a more senior position at the Muscat property management company where she works.

But like many young Omanis, the 26-year-old does not have the funds to pay for the course and cannot afford the interest banks charge on loans.

Ms Al Harthy, who has a bachelor’s degree in economics, currently earns about 850 rials a month (Dh8,118) as an assistant manager at the company.

Now she wants to enrol for a postgraduate degree in human resources at the non-profit University of Nizwa, but has struggled to save the 10,000 rials she needs.

“I saved half of that amount but I need to pay the other half,” Ms Al Harthy said. In addition, “the bank would charge me an interest rate of about 6 per cent”.

Instead, Ms Al Harthy is one of a growing number of young people who have decided to join a traditional “jameeya” (gathering) fund-raising scheme to help pay for their studies.

Usually set up by groups of neighbours or friends, the idea behind jameeya schemes is that each member pays a fixed amount of money every month that goes into a communal pot.

Each month, this sum is given to one of the group’s members on a rotational basis.

“The money raised is interest free, which means you get back exactly what you have paid,” said Haleem Al Shaksi, 36, a civil servant who is a member of a jameeya group in the central Omani town of Nizwa.

“Depending on how big the group is, the money can be significant.”

Jameeya schemes have existed in Oman for centuries, with the tradition practised in almost every city, town or village.

But Mr Al Shaksi said such schemes have become increasingly popular with young people over the past 10 years, as the growth of WhatsApp and social media has made it easier than ever before to publicise the practice and connect people looking to form jameeya groups. Some are attracted to jameeya for financial reasons, others for religious ones.

In 2010, the government began asking jameeya groups to register with the ministry of social development so that they could be better regulated.

Since that time, the number of such groups registering with the ministry has increased by an average of about 9 per cent every year, with 214 on the books at the end of last year.

With registration voluntary, however, Mr Al Shaksi said the ministry’s figures do not reflect the true number of jameeya groups in existence, and he estimates there are more than 1,000 operating nationwide.

The growing popularity of jameeya schemes among young people has coincided with a decrease in Omanis taking out personal loans from banks.

According to figures from the Central Bank of Oman, banks across the country lent 546.2 million rials to borrowers in 2016, down from 678.3m rials the previous year.

“Although the central bank does not link the slowdown of personal loan borrowing in 2016 with [a growth in] jameeya, there is a valid argument that these community financing schemes are increasingly getting more noticeable now for short-term financing,” said credit financial consultant Khalil Al Hussaini.

For those young people who do still want to take out a bank loan, however, jameeya schemes can be a way for them to save the money they need to pay the interest.

Sami Al Farsi, a 33-year-old working at the ministry of health as an accountant, is one person who has joined a jameeya scheme for this purpose. By paying a monthly sum of 450 rials to his 12-member group he can expect to receive a payout of 4,950 rials when his turn comes.

“With bank financing I would have to pay 4,950 rials plus 6 per cent interest”, he said. “Another thing is that I don’t need a guarantor with the jameeya like I do with banks.”

Mr Al Farsi is getting married this summer and wants to take out a bank loan to be able to pay for a honeymoon to Kuala Lumpur.

“That would give us a good start for our marriage, to go away on a romantic honeymoon,” he said.