Impact of Oman Crisis on Working Capital Management for SMEs

This report analyzes the impact of the oil crisis in Oman on Small and Medium Enterprises (SMEs), focusing on the critical role of working capital management. It explores various sources of finance, including short-term options like trade credit and long-term sources such as bank loans and retained profits. The report highlights the importance of sufficient working capital for SMEs in Oman, particularly in maintaining solvency, supporting credit, and capitalizing on opportunities. It then delves into the adverse impacts of the crisis on working capital, such as delayed debt payments, reduced profitability, and increased bankruptcy risks. Furthermore, the report examines government initiatives and support programs, including Alraffad, Sharakah, and SME development funds, as well as contributions from financial institutions like Oman Development Bank, HSBC, Alwathba, and Bank Muscat. Finally, it suggests strategies for effective working capital management, covering accounts receivable, cash management, inventory control, and accounts payable. The report concludes by emphasizing the significance of working capital management for the growth and stability of SMEs, ultimately contributing to Oman's economic development.

Running head: CRISIS IN OMAN
CRISIS IN OMAN
Name of the Student:
Name of the University:
Author Note:

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Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................4
Part 1................................................................................................................................................4
The different source of business..................................................................................................4
Importance of sufficient working capital for SME in Oman.......................................................5
Part 2................................................................................................................................................6
Impact On working capital..........................................................................................................6
Part 3................................................................................................................................................8
Suggestions for development of effective working capital management strategies........................8
Evaluation of the action that has already been implemented......................................................9
Suggestion what and how people have befitted.........................................................................10
Evaluation of the action that has already been implemented....................................................10
Suggestion what and how people have befitted.........................................................................11
Pioneering initiatives.................................................................................................................11
Government help in Oman.............................................................................................................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................15

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Introduction
Hook statement:
“Oil the source of income for Oman, The crisis of this oil is the base of all economic
problems in the country.”
Things that Happened in Oman during the Oil Crisis
At the time of low oil cost Oman goes through a problem of joblessness and reduces their
expenditure. Notwithstanding, the situation of emergency has in addition stretched out strain to
isolate the economy. Reduction in oil cost can be a reason for the purchasers who are European
as well oil influencing country on knowing that the Country Oman is facing an emergency
(Luciani 2015).
There is a major decrease in the SMEs working Oman from a year ago, as SMEs declined
by 31.2% in first quarter of 2017 as distributed by the National Centre for Statistics and data.
There are numerous elements that cause the loss of theories SMEs and the greatest impacts is
Working Capital Management (Stobaugh 2016)
There is immense importance of managing working capital when the case of SME comes.
The small and medium sized economy needs working capital as other companies in regular
business operation. These companies have their assets which are generally in the form of current
assets. Current liabilities at times fulfil their need of finance as external source of finance
(Cabeza et al.2018).

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Discussion
Part 1
The different source of business
Short Term Finance: The financing tool that can be used or be issued for a period of
one year or less than that and had to be repaid within that period of time are short term source of
finance. Few of them are:
Trade credit: These are short term finance which are provided while continuing the
activities of business or trading of the Organization.
Overdraft Agreement:. It has to be paid bank to the payee with the agreed sum of interest
at a pre decided time span.
Accounts Receivables: The amount receivable if received at the time when it is needed
for the business then it also acts as a source of finance to the business concern.
Customer Advances: The customer pays advances to book the product or services which acts
as the companies’ source of short term funds that can be used in operational activities.
Long-Term Finance: Huge amount of amount is raised as a fund from the business which
matures after the completion of one year with a certain amount of interest rate which is to be paid
to the lender of fund. Some of such funds are;
Bank: Bank provides loan which acts as a source of fund for the organization. The
organization pays it off in a period of 3 years or more. This is a source of loan term finance.

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Retained Profits: The profit that is retained, which is also the operating profit of the firm,
is also a source of finance for the organization.
Depreciation: the amount of depreciation shown on usable assets and deducted from the
capital that can be used as a source of fund for the organization. As the depreciation is a virtual
deduction from the books of accounts.
Importance of sufficient working capital for SME in Oman
The foremost focal points of keeping up adequate working capital are provided which are
applicable on the SME in Oman:
1. Upkeep of the dissolvability of the organization or evasion of its business indebtedness by
proceeding with creation.
2. Support of credit by incite instalment to provisions of crude materials and others.
3. Accessibility of money rebate which builds the volume of benefit of the organization Griffith-
(Jones and Director, 2011).
4. Great open doors can be abused, e.g., the Company may make off regular buys bringing about
considerable investment funds or it can get huge supply orders.
5. Settled resources like plant and hardware require not stay sit out of gear. This will upgrade the
effectiveness of the benefits which thus will improve the proficiency of the firm.
6. High assurance of representatives in light of a domain of sureness, security and certainty
which is an incredible mental factor.

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7. Creation productivity is improved by making uses on research, advancement and specialized
improvement and by keeping up ceaseless stream of materials.
Part 2
Impact On working capital
There is a major decrease in the SMEs working Oman from a year ago, as SMEs declined
by 31.2% in first quarter of 2017 as distributed by the National Centre for Statistics and data
(Stobaugh 2016). Some of such elements are:
Paying Debts on Time:
In Oman paying debts on time was not possible as there was crisis situation and no
management of working Capital. So clearing of debts was very slow which increased lack of
cash (Cabeza et al.2018).
Profitable business operation:
The business activity will be sound with no crunches, receivables will be right on time in,
and the payables will be ahead of schedule out (Chinnasamy et al. 2017). This sort of
circumstance is caused of good WCM and will prompt achievement and gainful smooth
business. The SME’S at Oman lacked profitability due to low price of oil which reduced their
profit percentage.
Avoiding bankruptcy:

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Great cash liquidity in the organization is a result from a decent Working capital
administration (Chinnasamy et al. 2017). This the main problem faced during a crisis situation.
These companies were not being able to clear their loans that they have taken from the banks.
This increased the rate of bankruptcy during the crisis in Oman (Cabeza et al. 2018).
Cheap Financing:
Financing was not possible during the crisis as the banks was at sage of no fund as the bank
loans that has been already given was not paid bank due to bankruptcy of the consumers.
Part 3
Government help to the SME’S
The Grand Endeavors of the SME, there are sure issues that still should be tended to.
(Luciani 2015). Sustaining the business, minimizing risks as a report of IMF on SME territory in
Oman hurries to raise that SMEs defy different goals, for instance, inadequate business venture,
access to finance, nonattendance of market support, and lacking agonizing help, which are being
tended to by the SME. In Oman the SME and IFM races to raise that SMEs in Oman stand up to
different objectives, for instance, inadequate business endeavor, access to finance,
nonappearance of market reinforce, and lacking agonizing help, which the master trend to.
Alraffad
Support is provided by the fund or source of finance which is given by Alraffad, on the
other hand the public authority provide support which is technical in nature, for example
consultants providing training, path, acceptance and other services which help in the

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development of the business. They also help in providing support to the enterprises for the
purpose of developing and making a good design that provide a identity of their project in the
context of marketing.
Sharakah
The project that khazzan has developed can be said to be one of the Oman’s social
investment program. The aim of this project is to support the development of the SME’s in
Oman. the main concern or point for introduction of this project is to enhance the identifying
capabilities of SME of their strength and weakness. A grant of OMR 5000 is raised for the SME
that helps them to developed their business and raise them to a better level in the market.
SMEs developing funds
In the particular campus if ‘entrepreneurial campus’ at once then a vital thing that will be
initiated that is the Alumni outreach which will invite Alumni black along with campus activities
and training of the entrepreneur’s training and the activities that are performed by the
entrepreneurship club further acquiring a very limited value of the advanced module.
Private sector
In the event that we take Al Raffd fund for instance, supporting through Oman
Development Bank (ODB) and what's more other cash related affiliations, five for each penny
minimum crediting target obliged on Banks by the Central Bank of Oman (CBO), the distinction
in the Public Authority for SMEs and the managed dispatch of the SME Exchange among others

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measure well for the progress of SME space, which contributes around 15 for every penny to the
GDP
Oman development bank
The Oman Development Bank offer loans which amounts to a amount of OMR 1 million,
which they provide at a very low rate of interest to the Small and medium enterprises for start up
as well as the development of the business (Al-Balushi and Anderson, 2017). These loans are
provided for a time period of about 180 day.
HSBC bank
To maximise working capital the vital thing that is required is the access to the liquidity.
The HSBC help in optimising working capital by providing solutions from their port folio, trade
and trade receive able as well and with this they finance the products of the SME and fund them
with the sales.
Alwathba
The amount of funding that is provided to the SME is about RO.400000 and about a
amount of 1 million to the medium industries to mean their working capital requirements. They
also allow other tools of funding like overdrafts, letter of guarantee and credit as well and loans
in relation to working capital.
Bank Muscat

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This bank also help the SME By providing solutions as working capital to fulfil the day
to day requirement of fund to the SME in the form of over draft on a basis which is resolving for
a period of time at certain rate of interest with the intention to help the small business.
Suggestions on how these help in managing working capital requirement
1) Account receivable
Thinks that can be suggested for betterment of working capital is that, Initiatives should
be provided to customers who timely clear due. The accounts should be avoid pending as aging
can create problem. Defaulting customers should be avoided.
2) Cash, bank
Suggestions on cash in hand and also at bank for maintaining working capital is that the
internal and external cash flow in the whole firm should be controlled. To achieve this financing
of deficit of the firm is also required and also controlling the balance of cash of the company
3) Managing Inventory
Suggestion for better management of working capital of the inventories should not be
over stocked; the products which are no performing well should be cut of the companies list.
4) Accounts Payable
Suggestion on account of accounts payable is that it can prove itself to be suitable way to
track the flow of ease (Sons 2016). An eligible collection team is suggested. Staffs that help in
collecting outstanding should be rewarded so that they keep on working better.
5) Overdraft

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While taking the option of bank overdraft as fund for SME the suggestion that can be
given is that the company should not extend the limit of the amount that has been sanctioned to it
by the provider of that over draft. This overdraft can prove to be a good and useful source of
fund to meet the daily requirements of working capital.
Conclusion
The county Oman regardless tried to give a efficient star to improve the GDP. Working
capital management is the most vital aspect that should be noticed by the Oman government to
improve the quality of the SME`s which will as well have a positive effect towards the country’s
economy.

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