Personal debt warning as Oman spending soars
Banks have already loaned out OMR17.41 billion to consumers, sparking calls for caution in Ramadan
MUSCAT: Oman needs to put a brake on consumerism as debtors increase, say experts.
Between January and March this year, Oman’s conventional banks have already issued loans and advances totalling OMR17.41 billion, and charities and legal firms have reported that the number of people turning to them for help after getting into debt trap is rising.
The Holy Month of Ramadan is synonymous with self-control but temptations in the form of attractive discounts on everything from cars to furniture entice people to buy more than their means or spend more than they can afford.
Real objective
Some people forget the real objective of Ramadan and end up having a huge debt, especially after the Eid frenzy. This shows that there is a need for change in the mindset of the society.
Speaking to Times of Oman, legal and economy experts, bank officials, charity workers and ordinary people have all emphasised the need for greater awareness about the consequences of overspending, though they have appreciated the efforts towards easy access to financing.
Khalifa Al Rahbi, legal advisor and the chief executive officer of Khalifa Al Rahbi Lawyers and Legal Consultancy, says they receive clients with a simple financial problem to those having debts of thousands of rials. Loans and advances by conventional banks ( between January and March 2015)
“Normally, we have two types of clients: Creditors and debtors. Creditors come to us to figure out the most appropriate way to recover their money while debtors seek ways to avoid legal penalties as a result of their failure to repay their debts,” he said.
Consumerism
Al Rahbi says that the growing number of these kinds of clients can be attributed to some factors, including increasing consumerism in the society and the people’s love to show off without thinking of living within their budgetary limits.
According to him, Omani Lawyers Association and Khalifa Al Rahbi Lawyers and Legal Consultancy have organised a campaign during the holy month to collect donations from the members of the community for insolvent prisoners with debts of not more than OMR5,000.
This is the third version of the campaign, Al Rahbi said, adding that 304 prisoners were released thanks to this campaign last year.
The legal advisor advised people not to take loans unless it becomes essential such as for buying a house or land plot as unjustified spending leads to debt.
Dar Al Atta’a charity organisation has also witnessed an increase in the number of people seeking financial assistance to write off their debts.
Maryam Al Zadjali, chairperson of Dar Al Atta’a, says that increase in consumption of goods is one of the factors to blame.
According to her, between OMR3,000 and 5,000 is the average debt of people seeking help.
“Sometimes, we receive people with debts, of over OMR30,000,” she said, adding that the highest amount of debt she has heard of is OMR120,000.
Al Zadjali said that Dar Al Atta’a does its best to help debtors after they submit a request supported by documents proving their claim.
Ahmed Al Hooti, a member of the Oman Chamber of Commerce and Industry (OCCI), said that some people misuse their loans and then find themselves in trouble when the time comes to repay the debt.
The organisations concerned and the media should join hands to raise awareness and promote the culture of saving, he said.
However, Al Hooti believes that some Omani private sector employees with a salary of OMR300 to OMR400 are not provided with the financing facilities which are given to the government employees.
The OCCI has been asking the authorities to provide better facilities to the private sector employees, he added.
Heidar, an economic expert, said that loans are good if they are used in a proper way, for example for purchasing the necessary things or starting up a business.
“Some people get loans and spend them on unnecessary luxury stuff or expensive travels and end up repaying the loans for a long period of time,” he said.
According to Heidar, the growth in the number of loans being taken by people in Oman is a consequence of a combination of global and local factors, such as the increase in the population and per capita income and the fact that more people are entering the market and starting a family.
More education campaigns are required and banks should have one-to-one conversations with their customers when they apply for a loan, he said.
The economic expert also believes that the decision of the Central Bank of Oman (CBO) to reduce the ceiling on personal loans from 40 per cent to 35 per cent of total bank credit has helped control overspending to some extent.
Abdul Wahab Abdulkarim Al Balushi, an ex-government employee, says that as Oman is a free economy, financing rules cannot be expected to become ‘stricter’.
“The banking regulator and other authorities cannot be expected to play the role of a ‘parent’, and spending appropriately is an individual responsibility,” he said.
Children should be educated in the family and later in school as to how to spend their money wisely from an early age, said Al Balushi, adding that parents should be good role models for their children.
In this era of materialism, some people are attracted to the latest models of mobile phone, car and other items and get loans to pay for the things that they may not really need, he added. They should set their priorities right and have foresight, Al Balushi noted, adding that the banks should educate their customers instead of just encouraging the people to take out loans.