Upping the ante
Though Oman Arab Bank has become aggressive in the personal loans category the bank insists that it is not deviating from its core focus, writes Mayank Singh

Rashad Jaffar Al Shaikh, Head, Retail Marketing and Business Development, Oman Arab Bank (OAB) has been a busy man lately. Shaikh has been spearheading a team that has been instrumental in launching a flurry of personal loans like Al Dar Housing loans, Markabati car loans, Al Himaya car insurance etc during the last year. “We looked at different life stages of a customer and came up with need based loans to satisfy their requirements,” says Shaikh.

The retail focus marks a significant change as OAB has traditionally been seen as a bank which has focussed on corporate lending and project finance. The mandate to help companies can be traced back to its parent Arab Bank’s vision of helping companies. Says Abdul Kader Askalan, CEO, OAB, “We are not shifting our focus but only making our services more comprehensive. This does not mean a dilution as we still concentrate on project finance and see ourselves as a partner in the development of the country.” The bank sees its aggression in the personal loan category as being complementary to corporate lending. The bank remains a lender of first choice for companies like Oman India Fertiliser Project, Sohar Refinery, Sohar Methanol, Oman Polypropylene etc.

Cherry picking
A focus on corporate credit also gave OAB a reputation of being a conservative lender. Will a more aggressive stance on the retail side lead to a dilution of its erstwhile conservatism? Says Shaikh, “Our appetite for risk is not as much as other banks as we believe that a few bad loans can affect a bank adversely.” So prudence remains the touchstone of OAB’s retail focus. The bank’s strategy of creating need-based loans has helped it lower its risks. For example a person availing of an Al Dar housing loan pledges the house as collateral to the bank, till the loan gets cleared. Similarly a Markabati auto loan customer gives his car as a security to the bank. “Retail lending is riskier because if a borrower’s salary stops for some reason then we have no recourse to get back our money. A need-based loan which involves collateral thus enhancing the asset quality of such loans,” adds Shaikh.

Though the bank may have a bouquet of products on offer, not everyone can avail of these facilities easily. OAB has short listed 400 government, quasi government and blue chip companies and personal loans are available to employees of these organisations. People from other organisations wishing to avail of these loans, need to go through a separate due diligence process. As a part of this process the bank looks at the financials of the company in question and takes a final call on the disbursement. Askalan raises a bigger issue, “Most banks are very active in the retail segment as they feel that it is easy to expand the personal loans business. But such indiscriminate lending will have an adverse impact on the entire society.”

Though the Central Bank of Oman has increased the limit for personal loans to 50 per cent (personal loans – 40 per cent and 10 per cent for housing loans), for OAB personal loans still accounts for only 35 per cent of its total loan portfolio, the remaining 65 per cent being made up by corporate loans. And the bank is in no hurry to push its retail loan portfolio. Says Shaikh, “Our strategy is not to increase our corporate assets and then push retail loans. The risk to return ratio has to be justified for us to do our business.”

Back-end work
A retail focus is not just restricted to merely launching products, but also entails a lot of work at the back-end. Realising this, OAB has created a unit called ‘On Demand Banking’ to service customers. The unit has a number of direct sales agents (DSAs) who would help clients. These DSAs will market OAB’s personal loan products to customers by making direct calls. It is also setting up a call centre to take care of customer needs. This call centre is expected to be up and running by the end of 2008.

A big challenge in the personal loan category is to offer differentiated products in me-too market. OAB on its part has been working on bettering the quality of its offerings to make them stand out in the clutter. For example its Markabati car loan offers customers a longer repayment period of seven years, the option of deferring initial installments for up to three months etc. Says Askalan, “It is the only product in the market which offers the longest tenure, flexible payment options and the most competitive interest rate, these will enable us to capture a sizeable business in the market.”

The bank has also been leveraging technology to offer better products. It has embedded its Visa card with an electronic chip. These chip based cards represent a generational change. Says Askalan, “We use a very advanced technology in our smart cards.” These smart cards allow customers to make payments to government departments and other purposes.

Says Shaikh, “The challenge is to break into the market, but the good part is that one does not need to reinvent the wheel. We have always had personal loans and we only need to align it to customer needs.”

Changing stripes
The bank has been reinventing itself to maximise available opportunities. So apart from personal loans it has become aggressive in transaction banking offering advisory services. On the e-banking side it has started offering customers a choice of paying their utility bills electronically, Internet banking, online trading facility (e-Link) etc. The most visible manifestation of this change has been the unveiling of a new logo. Though the motifs on the logo (camel, horse and a map) remain the same the colours have changed to a more cotemporary blue. The 70 year old logo which signifies endless opportunities has been given a fresh look with this change.

The bank is in the process of strengthening its capital base from the present RO60mn to RO100mn in the next two years. Says Askalan, “This is essential to finance big projects that are coming up in the sultanate.”

An enhanced capital base will also help OAB to strengthen its retail loan portfolio. In all likelihood Shaikh’s days are going to get busier from now on.

 

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