From the editor's desk

Technology is rapidly changing the global finance industry, whether it is in the banking, capital markets, investment, or insurance segment. COVID-19, and the social distancing measures it brought, has only highlighted the urgency for better digital accessibility. In line with this trend, the large majority of TBY’s interviewees have highlighted Oman’s financial sector as the most receptive to embrace digital innovation. Financial institutions must contend with burgeoning demand for innovative new products and systems to meet consumer demands in a market that is increasingly digitally enabled. These digital efforts require hefty investments that most players in other industries cannot afford due to the lack of liquidity, but all finance executives interviewed by TBY have recognized the need to be first movers in adopting new tech solutions and not lose out to competition from within and outside the sector.

Firstly, we have observed how fast-changing customer expectations and the quest for improving business processes paved the way for increased digitization in the Omani banking sector. The investments in technology are a direct result of healthy balance sheets, despite a challenging macro-economic environment. In 2020, Oman’s banking sector has been displaying the same robustness and resilience showcased over the years, with the top eight Omani banks having enjoyed a healthy surge of 11.5% in net profits YoY. We also received positive feedback from businesses on the reduction of the minimum capital adequacy ratio by 1%, enacted by the central bank to create additional space for credit disbursement.

On the capital markets side, the elevated current account deficit, a result of the country’s dependence on imports, continued to negatively impact investor sentiment, preserving the lack of market liquidity that most interviewees complain about. In an effort to reverse the tide and increase activity on the stock market, both the Capital Markets Authority and the Muscat Security Market are incorporating new digital surveillance, information, and trading systems. New efforts are also being made to reduce the number of passive investors and increase the availability of risk-management tools. Investors are also positively receiving the implementation of the XBRL system to report financial and non-financial information by all issuers and enable deep dive analytics on digitalized data through an online portal.

In this special report, we also hope to shed light on the nascent venture capital scene in Oman. The two main players in the segment are IDO Investments and Phaze Ventures; the first one being the VC arm of the State General Reserve Fund, the second a VC spin-off of the PDO to invest in proven young enterprises. While exciting, our research highlights how the ecosystem still lacks a solid foundation of incubators and investors eager to support start-ups in their very first stages, resulting in a very high rate of defaults.