Al Busaidy Mansoor Jamal & Co.

Barristers and Legal Consultants

Banking and Finance

AMJ wins global Islamic finance award

Filed under AMJ Awards, AMJ News, Banking and Finance, Capital Markets, Islamic Banking and Finance

IFNAwardsDubai280216comp

AMJ has won an international award for its advisory role on Oman’s OMR250million inaugural sovereign sukuk issuance.

The firm received the prestigious global Sovereign Deal of the Year 2015 award from the industry leading Islamic Finance News (IFN) at its annual Deals of the Year Awards ceremony in Dubai on February 28.

The Awards recognise those who have participated in the industry’s most groundbreaking transactions each year. The sovereign issuance also won an honourable mention in the top global ijarah and sukuk categories.

Commenting on the award, managing partner, Mansoor Jamal Malik said, “We are delighted that Oman’s first-ever sovereign sukuk issuance has been recognised as the standout sovereign deal of the year in the global Islamic finance space. We are pleased to have contributed to a successful debut offering which is expected not only to boost Oman’s emergent Islamic finance industry but also to strengthen the capital markets and to support the government’s economic diversification drive.”

Although the last of GCC states to embrace Islamic finance, Oman has over the last three years built a strong Shariah compliant banking and finance industry. Today the sector comprises two fully-fledged Islamic banks and six Shariah compliant banking windows, as well as two takaful operators and a several Shariah compliant investment funds. Islamic banking assets accounted for 7.4% of the total banking sector at the end of 2015 and are forecast to reach 10-12% within the next two years.

Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior associate, Asad Qayyum.

For more information, contact Bernadette Bhacker-Millard

AMJ advises on US$1 billion loan to the government of Oman

Filed under AMJ Deals, Banking and Finance, Oman Economy

Ministry of finance

AMJ acted as Oman Counsel for the lenders on a syndicated loan of US$1billion to government of Oman in mid-January. Eleven international and regional banks participated in the five-year loan sought to cover part of an OMR3.3 billion deficit in the state budget caused by the decline in oil revenues. The syndicate includes Citigroup, Gulf International Bank and Natixis, who were the initial book runners for the transaction. Other banks are National Bank of Abu Dhabi, Societe Generale, Sumitomo Mitsui Financial Group, Bank of Tokyo-Mitsubishi UFJ, JP Morgan, Credit Agricole, Standard Chartered and Europe Arab Bank.

Signing the agreement on behalf of the Sultanate’s government, Darwish bin Ismail Al Balushi, minister responsible for financial affairs, said the participation of such a large number of banks reflected the trust of global banking institutions in the strength and resilience of Oman’s economy and its positive outlook.

AMJ’s team was led by banking and finance partner, Marcus Pery assisted by William Barrie. Commenting on the deal, Pery said, ‘We are delighted to have acted on this very significant financing transaction which is one of several where AMJ has advised lenders on contracts with a sovereign entity.’ AMJ recently advised Bank Muscat as issue manager and joint lead arranger on Oman’s successful, maiden sovereign sukuk.

Private sector must comply with SPS

Filed under Banking and Finance, Central Bank of Oman, Oman Labour Law

5Private sector companies will face increased scrutiny from January 2014 over compliance with new salary protection rules according to Suhail Yahya al Khasabi, the head of the ministry of manpower’s salary protection centre.

The Salary Protection System (SPS) is a national electronic platform implemented jointly by the ministry and Central Bank of Oman which requires employers to pay all staff salaries through authorised financial service providers in the Sultanate in accordance with article 53 of the Oman labour law. The primary objective of SPS is to ensure that workers are paid on time and in accordance with contract in order to avoid disputes. The ministry receives 5,000 to 10,000 complaints from Omani and expatriate workers relating to non-payment of wages every year. The system is particularly beneficial to low-salaried and uneducated employees who are vulnerable to exploitation by employers. A further advantage of the SPS will be the availability of a real-time database on the labour force which can be used for a number of purposes such as to monitor private sector companies’ compliance with labour-related policy such as Omanisation policy and to identify the employment of illegal workers.

Central Bank of Oman mandates lending to SME sector

Filed under Banking and Finance, Central Bank of Oman, News, SMEs

news-imageReforms introduced by the Central Bank of Oman (CBO) in May, mandate all banks operating in the Sultanate to lend a minimum 5% of their credit portfolios to small- and medium-sized enterprises (SMEs) by December 31, 2014 . As well as boosting the availability of financing for Oman’s fledgling SME sector, the reforms aim to ease the flow and reduce the high cost of credit to a sector the government considers an engine of growth for the future.

Key features of the reforms include:

  • Low interest/low cost credit for SMEs;
  • Relaxation of the prudential requirements governing SME loans, most notably by reducing their risk weights by 25%;
  • Domestic banks are required to set up dedicated SME finance departments with trained staff headed by an AGM, and engage in a “formal and periodical” exchange of views with the SME sector;
  • Foreign banks are instructed to “formulate a liberal lending policy” consistent with CBO regulation and the government’s vision and to dedicate trained staff to cater to the SME sector;
  • Introduction of reporting requirements, namely:-
    a. a monthly return on SME lending commencing from June 2013;
    b. a quarterly return of the loan appreciations received and processed, commencing from the quarter ending September 2013.”

In addition to these mandatory requirements, the CBO invites banks to support the SME sector by providing assistance on project planning, finance and business management, business initiatives, technical support, sourcing of raw materials, process management and marketing.
The reforms stresses that at no time should the portfolio of any bank fall below 5% and any bank which already allocates a larger share of its portfolio to SME lending cannot reduce its limit to the minimum.

While the regulations leave unclear the extent to which lending practices should be loosened, (stipulating that banks “should not be guided by collaterals in their credit decisions” when lending to SMEs but should still “equip themselves well in a systematic way”), there is no mistaking the thrust of the new CBO measures. As bank lending growth in Oman hit a 22-month low of 10.9 percent in February, the regulations urge banks to take measures “on an urgent basis, keeping in mind the vital role of SME segment in economic diversification, contribution to the national economy and Omani employment”. Supporting SMEs is a key part of the government’s economic policy for tackling unemployment in Oman, estimated at more than 24 percent by the International Monetary Fund and avoiding the recurrence of 2011 protests against joblessness.

SMEs have been widely recognized as effective and successful in developed markets, where they are responsible for much of the growth in new jobs contributing to 60%–70% of employment and more than 50% of GDP. However, in spite of the acknowledgment that SMEs are critical to economic development, many face substantial barriers to growth and sustainability ranging from limited access to and the high cost of finance as well as an unfavorable regulatory environment. Other challenges to the growth of a robust SME sector are lack of business management skills and market linkages needed to grow and succeed.