High unemployment rate has become troublesome to governments around the world, which has resulted to decline in economic growth and development. Unemployment refers to the total number of individuals that are able and willing to work at a prevailing work wage but can’t find work to do. Figure 1 shows that total unemployment of labor force decreased from 5.225 percent in 2009 to 2.671 percent in 2019. While unemployment of youth labor force decreases from 15.03 in 2015 to 13.186 in 2019.  Significantly, the role of SMEs in reducing unemployment in Oman   cannot be over emphasize. Figure 2 show that, in 2019 from adult population in Oman who perceive that moderate Omanis prefer living in a challenging environment 55.10% while 85.34% of adult population believes starting a new business is a significant career choice, and that those who achieved starting a new business enjoy a high rate of social status and respect 85.67%. However, 75.11% of adult believes that new businesses successfully receive positive coverage via internet and public media. While 39.80% agree that the major objective of a business is to give solutions to social issues.

However, in other to reduce the rate of unemployment. Most countries have adopted entrepreneurial activities through the small and medium scale enterprise (SMEs) to create employment and bring about economic growth and development in the various economies. Small and medium enterprises (SMEs) positively have a significant impact in the world in general, because of in innovation, employment creation, and entrepreneurship and economic growth. With greater number of about 95% enterprises are small and medium enterprises around the world [1]. According to the world Trade Organization small and medium scale (SMEs) contributes 90 percent of business population, 60 to 70 percent to employment while 55 percent to gross domestic product in developed economies. 

Also, in developing countries, 90 percent were contrast by all firm not included in the agricultural sector. Developing economy such as Oman, which is characterized as an oil producing country, including other many other features. Over the years have focused on developing small and medium scale enterprise as a potential way of improving economic diversification and creating employment which in turn leas to new technology and increase in productivity. Similarly, most empirical studies have also suggested a positive significant between small and medium scale enterprise and employment. Studies reveals a positive significant impact on economic growth and employment and in turn reduces unemployment among youths [2-3].

Although, statistical shows that 40 percent of the workable force is employed by small and medium enterprise firm while their contribution to GDP are between the range of 15 to 20 percent. Some of the positive significant impact can be statistical shown in the total number of small and medium-sized enterprises (SMEs) registered with the Public Authority Statistical evidence from National center for statistics and information  shows that 44,139 new business have been registered at the end of April 2020 which comprises of 12.6% compared to the period of 2019. In other to sustain economic growth and development and empower entrepreneur in Oman, the involvement of government is highly necessary. 

Figure 1: Total number of unemployment from 2000 to 2019 in Oman

Source: World Bank, 2020

Figure 2: Perception of societal values related to entrepreneurship in Oman: Percentage of high positive perception, within the 18-64 age group, to key questions related to this topic

Source: Author’s computation; Global Entrepreneurship Monitor report 2019- 2020

Small and medium enterprises is one of the viable ways through which a country can completely reduce the rate of its unemployment but, small and medium scale enterprises cannot over be emphasized on the importance of government involvement enhancing new business and support their potential growth strategies. The importance of government involvement enhancing new business and support their potential growth strategies the government have created two institutions such as the Public Authority for Small and Medium Enterprises Development (Riyada) which provides non- financial support with the objective of empowering entrepreneurial activities and the Al Raffd fund which also offers financial support to entrepreneur. Brief development of SMEs in Oman.

Enhancing Small and medium enterprise in Oman, is a major priority to the government over the years. During the period of 2001, the ministry of manpower (MOM) introduces the self-employment program, which aimed at creating employment opportunities for Oman’s youths. Invariably, influencing the development of Oman’s labor force market, facilitating entrepreneurial activities and boosting the employment level. The Self-employment and National Autonomous Development program (SANAD) encourages entrepreneurial initiatives by providing mentorship, government assistance in services and supporting through soft loan.

Although, with government’s participation in increasing the contributions of small and medium scale enterprise to the national economy. Government participation through banks such as the Omani bank sector, the Omani bank have provided immense support for the development of SMEs sector in the region. In 2012, the Oman Arab bank launched a product for SMEs financing called Tonomuhi, or my Ambition, which aims to provide banking services to SMEs. 

According to Ashrafi and Murtaza [4] government of Oman in 2013 decided to move towards diversification of economy so that more jobs will be created to sustain individuals in the economy. This brought about large amount of people from  other countries  to invest and work in Oman and were earning a high income but, due to the high rate of unemployment among Oman’s people, the government decided to move towards ‘Omanization’ which is a strategy to locate Oman’s people at jobs by removing people of other countries. Consequently, in 2014 Central Bank of Oman (CBO) mandated all commercial banks to allocate 5 percent to small and medium enterprises. 

Researchers have explained the condition of SME in Oman from 2015 that how its government is taking exemplary steps to strengthen their SME and overall country’s economy. SME sector of Oman is showing improvement and growth. Almost 90% of a private sector is based on SME and it is providing a lot of employment opportunities to youth due to which unemployment of a country has decreased a lot in past two years. Past studies have explained that government of Oman has taken some initiatives to support its SMEs but, still, some gap exists. The government is providing short-term loans to the owners of SME so that they can easily start their own business and can also provide employment opportunities in a market. Researchers have explained that SME can gain success when it will gain long-term loans at a low cost of finance because, in this way, owners can easily pay back their loans [5]. Short-term loans to SME always create a hurdle in running a successful business.

Through the public and private sectors more appropriate measures have been taken to enhance small and medium enterprises in Oman. In the public sector, a vast amount of SMEs registered for Riyada small and medium enterprise at 606 in 2018 January, bringing the total number of these institutions to 32, 441 according to statistical evidence with preliminary data by the National Centre for statistic and Information (NCSI). Although, this number has decline compared to the amount in 2017.   The public establishment for small and medium enterprises development (Riyada) in line with the Petroleum Development Oman (PDO) have initiated the 2017 to 2018 technical subsidy programme to develop small and medium enterprises, which targeted 300 entrepreneurs. 

Problem and challenges of SMEs in Oman 

The problem and challenges hindering small and medium enterprise in OMAN have widely been investigated by different authors. According to Al Bulushi and Bagum [6] financial management constraint, marketing management constraint, operations management constraints and human resource management constraints are challenges faced by SMEs in the region. However, the authors categorized these constraints; financial management constraint which includes lack of availability of credit, lack of availability of long term credits, working capital management, cost of finance.Marketing management constraints lack of marketing budget, lack of marketing knowledge, lack of RandD to identify new markets. Operations management constraints lack of proper knowledge of outsourcing and supplier’s management, environmental issues ,lack of access to latest technology. Human resource management constraints lack of managerial skills, lack of formal relationship between workers and owner, lack of knowledge to hire related employees. Similarly, Saleh and Ndubisi [5] noted that operational cost is one of the highest problem faced by small and medium enterprises in Oman, due to the fact that low investment cannot afford this cost operation. 

Al-Mataani [7] noted that the some of the major problems encountered by SMEs includes; policies designed to empower small and medium enterprise, labor market inefficiency, rigid laws and regulations by bureaucratic, and inappropriate entrepreneurship education. According to Al-Shanfari et al. [8] complexity of regulations, procedures and government red tape are amongst the biggest barriers for the industrial growth and development in Oman. Christina et al. [9] noted that   lack administrative, financial and marketing issues are factors hindering small and medium enterprise in Oman.

According to Schwab [10] rigid labour regulations, government bureaucracy and lack of education on workforce are some of the factors affecting enterprises in Oman. Alqassabi [2] also identified six factors hindering small and medium enterprise in Oman namely; competition, lack of marketing, access to finance, rules and regulation, knowledge and business culture and technological changes. In line to this, Yahya et al. [11] competition maximization, lack of financial accessibility, lack of marketing activities, geographical isolation and access to raw materials and finial product market are challenges faced by small and medium enterprise in Oman. According to Khan and Almoharby [12] small and medium enterprises in Oman, experienced insufficient resources to manage the rise in customer’s demand. However, the lack of productivity capacity due to finance is one of the biggest challenges facing companies to expand their enterprise. 

Wahba and Ortiz [13] noted that other challenge hindering businesses in industrial estates in the Middle East is the comparison between the supply and demand.  They also, figure out another factor hindering enterprises or business in the Middle East are namely poor geographical location, inadequate infrastructure and labor markets, inadequate parcel sizes, inflexible subdivision plans, inability to expand, inadequate zone management and maintenance, and unaffordable cost of land acquisition.

The lack of business required knowledge by SMEs, inadequate financial access and other guarantees providing funds institutions, hidden trade and government tax as a result of lack of regulation and administrative burdens , limited capacity to grow , undesirable will and method from employees with regard to the incorporation of modern  technology, insufficient  support services as result of lack of electronic connectivity among institutions, lack of networks between entrepreneurs, with  the same business and lack of knowledge to enhance modern policy to address the barriers. These factors have been agreed by researchers to be a contributing factor impeding entrepreneurs or small and medium –sized enterprises in Oman [14-15].

Small and Medium Enterprises in Oman: An Overview

Undoubtedly, Oman is unique country known for oil production and likewise a developing economy. Oman as a country have developed ample opportunities for the locals and indigents to generate and earn income from different source this advent led to the introduction of the policy known today as Omanisation policy. The main drive of this policy was to see that the people of Oman are able to contribute more through local initiatives and contents such as SMEs in the development of the economy. According to reports for the ministry of commence in 2020 registered number of SMEs have rising from 118,386 in 2009 to over 602,235 SMEs contributing of 36% to the country`s gross domestic product (GDP) which is well felt within the four governorate, Dhofar, Muscat, Al Buraimi and Musandam and the five regions of Al Dakliyah, Al Dhahirah, Al Batinah , Al Wusta and Ash Sharqiyah. The ministry of commerce and industry holds that SMEs accounts for over 90% of all enterprise in Oman. This figure is a considerable pontenial the SMEs development in Oman has the capacity and strength to create generate employment and grow the economy both locally and internationally.

However, to drive this massive development of SMEs the government has introduced lots of programs that can make the growth on SMES in Oman to be sustainable. In 2014 the government lunched the Al Raffd funds this was the first fund that was introduced with the aim of providing financial support to mainly young people to start up business or improve their already existing business. More programs have been launched by the government as Tasees for the unemployed to start up small business of their own, Mawred for individual already benefitting from social insurance, Riyada for rural woman, entrepreneurs, craftsmen and all business beneficiaries. And of recent more programs are in motion to capture those who have not benefitted from previous programs. The Al Raffd enables the government to trace the progress of the beneficiaries within three month and see that their business run and managed on a good manner.  The government of Oman continuous support of SMEs have come in the area of branding, marketing and assisting SMEs with research also introduced the PASMED programme which has trained over 1000 candidates in various fields related to business and entrepreneurship and development of SME by granting funds, solving technical issues and other related management. Again, to train SMEs on challenges as financial management, competitors and market conditions. Al Raffd fund has various funding scheme to assist SMEs especially through funding the Al Raffd fund commenced with $280 million for SMEs and this fund is increased by 10% on an annual basis this put in place is to promote the growth of SMEs as a driving force of the economy through employment generation and other growth strategies.

Prospect of SMEs in Oman

 In 2015, Oman small and medium enterprise (SMEs) conference highlighted prospects for the SMEs sector in other to bring about development in the Omani economy. It aims to achieve following;

• To bring about a tremendous untapped potential the SMEs sector

• To create and influence a change in the attitude towards SMEs

• Indicates a grass-root level entrepreneurship mindset amongst citizens

• Create new provisions for financing of SMEs

• Ascertaining the government strategies pertaining to SMEs for Omanization

• To bring about status of past and ongoing SME programs and Funds in Oman

Government Intervention on SMEs 

Government intervention on SMEs through policies and programmes are imperative to empower entrepreneur to carry out their entrepreneurial activities successfully. Government involvement in small and medium enterprise is key because government provides basic aids and support to enhance entrepreneurship such as financial, marketing, technical, advisory, infrastructural and entrepreneurial policies. In Oman, government support to enhance SMEs have be effectives through creation of National Youth Program for skill, Oman development bank, AL Raffd fund, Riyada., Ahli Bank and Bank Nizwa, SAS Program, The industrial Innovation Support Programs, GROFIN, TOWELL, Saud Bahwn Group, ZUBAIR SEC, Public Authority for Small     and      Medium     Enterprise    Development. (PASMED), The Public Authority for   Investment Promotion  and Export Development (PAIPED), Oman Chamber of Commerce and Industry, INTILAQAH, The CELL, National Business Center and SAS program. thus, Table 1 shows the objectives of the various initiative by government [16].

Table 1: Summarizing Government Intervention on Smes

Source: Author’s Computation

The study investigated the impact of small and medium scale enterprise on employment creation in Oman. The study concludes that small and medium scale enterprise overtime have resulted to an appropriate measure of reducing the rate of unemployment among labor force especially youth unemployment. Economic growth and development is very imperative in various countries of the world. Economic development occurred due to reduction in poverty, unemployment and inequality influence by increase in per capita. According to World Bank total labor force of unemployment rate decline from 4.36% in 2013 to 2.67% in 2019, this occurred also because of various contribution of   SMEs in Oman economy.

However, most SMEs are faced with lack of capital, operation constraint, human resource constraint and management constraints. These constraints have hindered the small and medium enterprise. Although, government have provided programs and policies such as National Youth Program for skill, Oman development bank, AL Raffd fund and Riyada, have been adopted to help or enable applicants to get soft loans to start up or maintain their businesses. The small and medium enterprise sector in Oman is at the point of growth curve and various empirical literature  have showed that SMEs is of a high need of government aid and support to foster growth and development. The influence of Oman’s SME in gross domestic product is low but, have helped the country in decreasing unemployment rate. 

Policy Targeting and Recommendation 

One of the policies to ensure the smooth promotion of small and medium-sized enterprise is the 5 percent stipulated by the Oman’s central bank. The central bank of Oman has implemented a 5 percent on all commercial bank’s loans for SMEs to ease unemployment. This was introduced in 2014   which recognized the hindrance to access and huge cost of finance encountered by small and medium sized enterprise from banks. However, government have created policy through the corporate income tax to implement a 3% known as zero rated to sustain and promote growth for entrepreneurs in Oman called the Muscat- based tax expert. 

Recommendation 

Small and medium enterprise has the ability to create jobs and reduce the rate of unemployment in Oman. The study recommend that government should create more policies and programs that will enable the entrepreneurs to increase their productivity capacities and bring about economic growth and development. The study also recommends that government in a bit to facilitate SMEs  should provide low-cost finance for loans. These loans provided by the government should cover a long-term period so that small and medium of enterprises will be able to repay the loan by not affecting their business system operations and their business growth. Nevertheless, If the short-term loans are only provided by the government, then this SMEs will never think about growing their business due to lack of working capital for business growth and expansion. The study recommend that entrepreneurial training should be conducted in Oman country. This will   enable   the   entrepreneur to be more innovative, better market     analysis    and    better    informed   about   their environment. The study recommend that school entrepreneurial education should be introduced in all stages of education.

1. Ayyagari, M. et al. Small vs young firms across the world: Contribution to employment job creation and growth. Washington, DC: The World Bank, 2011.

2. Alqassabi, M. "Insights on sustainability of small and medium enterprises in Oman: A conceptual framework." International Journal of Economic and Financial Issues, vol. 10, no. 1, 2020, pp. 209-218.

3. Ayodeji, B. I. "Innovations and innovation capability in palm kernel processing industry in south-western Nigeria." International Journal of Innovation Science, vol. 9, no. 1, 2015, pp. 102-114.

4. Ashrafi, R. and Murtaza, M. "Use and impact of ICT on SMEs in Oman." The Electronic Journal Information System, 2008, pp. 125-138.

5. Saleh, A. and Ndubisi, N. SME development in Malaysia: Domestic and global challenges. 2006.11

6. Al Bulushi, B. and Bagum, S. "Growth strategies of SME in Oman- issues and challenges." International Journal of Small Business and Entrepreneurship Research, vol. 5, no. 2, 2017, pp. 21-61.1

7. Al-Mataani, R. "Examining the entrepreneurial context of Oman: Multi-layered perspective using the institutional lens." 2017.2

8. Al-Shanfari, D. et al. SME development symposium research summary. Oman: Thefirm, 2013.

9. Christina, B. et al. "Challenges and barriers encountered by the SMEs owners in Muscat." International Journal of Small Business and Entrepreneurship Research, vol. 2, no. 3, 2014, pp. 1-13.

10. Schwab, K. The global competitiveness report 2016–2017. Geneva: World Economic Forum, 2016.

11. Yahya, F. et al. Supporting a dynamic SME sector: Challenges faced by SME. Singapore: National University of Singapore, 2016.

12. Khan, M. G. and Almoharby, D. "Towards enhancing entrepreneurship." Journal of Enterprising Culture, vol. 15, no. 4, 2007, pp. 371-392.

13. Wahba, S. and Ortiz, A. "Access to industrial land in the Middle East and North Africa region: Key challenges and opportunities." Urban Week 2009. Washington DC: World Bank, 2009. Retrieved from http://siteresources.world bank.org/INTURBANDEVELOPMENT/Resources/336387-1235146842675/5848984-1237338325293/Wahba.pdf

14. Jansen, H. et al. "SME ecosystem in the Sultanate of Oman, sensing and seizing oppurtunities in the tourism industry." 2017.

15. Saqib, M. et al. "Moderating role of technology orientation on the relationship between knowledge management and SMEs' performance in Oman." International Journal of Economic Perspectives, vol. 11, no. 1, 2017, pp. 433-441.

16. Talabi, A. "Oman 9th five-year development plan and the strategic economic sectors (2016-2020)." 2017.