CEO's Message



Al Omaniya  Financial Services (AOFS) has completed 26 years of successful operations as a Non-Banking Financial Institution, offering a comprehensive range of financial products.   Over its  tenure  of more than two  and half decades, the company has established a strong market presence with robust systems and processes and has crossed many significant milestones.

The following discussion and analysis provide information that the management believes, is useful in understanding AOFS’s operating results and financial position.  The discussion is based  on AOFS’s continuing  operations and should  be read  in conjunction  with our consolidated financial statements and related notes appearing  elsewhere in this report.
Certain statements in the MD&AR describing the company’s views, objectives, projections, estimates, expectations, etc. may be extrapolative within the  ambit  of applicable laws and regulations. Actual results could differ materially  from those expressed or implied. Important factors  like changes in government regulations, tax laws,  interest rates in the domestic and international markets, demand and supply of capital goods, etc. may influence the company’s operating results. 


As we usher  into the year 2023,  the world economy  continues to show fragility with global growth  slackening in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine. The IMF has  forecasted 2.9% growth  for 2023  as against 3.4% growth  last year. The IMF sees the  pace of global growth falling this year compared with 2022, but by a smaller margin than it predicted in October 2022 The US central  bank has slowed  the pace of its interest rate  hikes but opines there will be ongoing increases as it continues to battle inflation. The Federal Reserve  has recently  increased its benchmark overnight interest rate  by a quarter of a percentage point, taking it to a range  of 4.50-4.75%. This follows six larger rises  in a row. The FED Chair is of the opinion that though inflation has begun  to slow, we can expect  a couple of more rate  hikes, though not very sharp, in the months ahead and we do not see the Fed cutting rates this year.  The risks to the outlook remain tilted to the downside, even if adverse risks have moderated since October 2022  and some  positive factors  gained in relevance.


The pandemic has inflicted heavy job losses shrinking the economy. The sultanate has adopted various fiscal measures over the past year to support the economy, including interest-free emergency loans, tax and fee reductions and waivers, the flexibility to pay taxes in instalments and a Job Security Fund to support citizens who lost their jobs. Oil & Gas continue to be the major revenue source of Oman economy. S&P predicted an economic rebound from 2022, supported by higher oil and gas revenue and a rebound in non-oil sector growth contribution from the logistics, manufacturing, agriculture, fisheries, and tourism sectors. As of late November, 84% of the targeted population got two vaccination doses and a booster programme had begun.

Fitch Ratings has revised Oman’s Outlook to Stable from Negative. The revision of the Outlook is on account of actual and expected improvements in key fiscal metrics including government debt/GDP and the budget deficit, driven by higher oil prices and fiscal reforms, and a lessening of external financing pressures. Fitch Ratings forecasts the budget deficit to narrow to 1.6% of GDP in 2022, given a strong year for oil and gas revenue, a full year of VAT revenue, lower oil and gas capex and some decline in subsidy costs.

The 2022 Oman budget reflects the objectives of the Tenth Five-Year Development Plan (2021-2025) paving the way to implement Oman Vision 2040. Oil & Gas revenues are budgeted at RO 7.2 billion, assuming a conservative oil price of US$ 50/bbl, which represent an increase of 34% compared to the 2021 budget of RO 5.4 billion. Non-hydrocarbon revenues are budgeted at RO 3.3 billion. Estimated total revenues under 2022 budget stood at RO 10.580bn and public spending is estimated at RO 12.13bn resulting in a budget deficit of RO 1.55 billion, which is the smallest since 2014. A major part of the deficit in 2022 will be financed from external and internal borrowing, while the rest of the deficit will be funded through withdrawal from the state’s reserves.

Oman executed smoothly its funding plan for 2021 easing the external financing pressures to some extent. External maturities will peak in 2022 at USD 6.1 billion, including a USD 3.6 billion syndicated Chinese loan, before moderating to an average of USD 3 billion in 2023-2026. The Central Bank of Oman’s gross foreign reserves have increased in 2021 supported by higher Oil & Gas revenue.

Oman is on the path to moderate growth  since October 2022,  primarily driven by higher crude oil and gas prices and production coupled with increased tax collection. Oman recorded a budget surplus  of RO 1.146  bn for the year 2022. The additional  financial revenues enabled the  government to pay off part  of the  public debt.  Oman’s 2023  budget is based on a prudent average oil price of US$55 per barrel while the  actual  average for 2022  was  above  $94  per barrel. The oil price is expected to be stable in 2023.  Also, the Omani government has been taking steps to diversify its economy  away from its heavy reliance on oil by investing in sectors such as tourism, logistics, and manufacturing and these efforts are expected to bear fruit in 2023  and beyond. All these have prompted the major rating agencies to upgrade the  credit  rating  of Oman resulting in enhanced confidence  of foreign  investors, corroborating the accomplishment of Oman’s financial & economic policies. However, there are significant works that  still needs to be done to navigate through the existing challenges to put Oman on a more sustainable path.

The tightening of liquidity in the market leading to an unprecedented increase in the cost of funding could dent the economic  growth  prompting mainly the distressed borrowers opting for borrowing  at these rates which would not only create immense pressure on the borrowers but may also result in higher delinquencies.

Additional stress on domestic banks could be triggered by the economic consequences of a more protracted recovery from the pandemic. This in turn could lead to a rise in bankruptcies and weaken the balance sheets of the banking and non-banking sectors.


Maintaining Asset Quality has been the primary focus of the company. There has been cash flow distress with major contracting companies. The delay in government spending and the slowdown in project payments has impacted the cash flows of the major contracting firms as well as sub-contractors trickling down the line at the individual level as well. This has resulted in a major systemic risk in the financial system leading to deterioration in the asset quality, restrictive credit sanctioning, increase in the-non-performing loans and higher provision requirement for bad and doubtful debts. Hence, the company has been very cautious in writing business this year.

The fiscal and economic policies of the government for the year 2020 are prudent and forward looking. With expected release of funds for completed projects and some new spending on infrastructure and tourism sector, the economic activities are expected to improve the optimism.

The fiscal and economic policies of the government for the year 2019 are prudent and forward looking. With expected release of funds for completed projects and some new spending on infrastructure and tourism sector, the economic activities are expected to improve the optimism.The company’s overall strategy is established and approved by the Board in consultation with the Management and the Senior Executive Team. The most significant strategic risks faced by the company are identified, assessed, managed and mitigated by Senior Management, with oversight by the Board.

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and will cause theother party to incur a financial loss. The company attempts to control credit risk by setting limits for individual\borrowers, monitoring credit exposures, limiting transactions with specific counter parties and assessing continually the creditworthiness of counter parties.The default risk for the company is at an acceptable level. The company has substantially lowered its NPA percentage and has one of the lowest NPA levels in the industry.

The company with its existing product lines of project funding through consortium financing, working capital funding, asset financing, bills discounting and debt factoring,  including its ‘Lifeline’ and ‘Lifestyle’ segments has managed to retain quality assets.
The  retail  asset financing  product under the brand name  ‘Lifeline’ offers  a variety of specialised  finance products for the self-employed, salaried individuals, transport operators, small  and  large  businesses, etc. The  ‘Lifestyle’  loan  segment (micro  credit  program) continues  to do exceedingly where the company has a good network  through  its branches  and employer tie- ups.
Our service has the unique attributes of speed, transparency, quick response, empathy, understanding customer concerns and ethical fair practices.  We endeavor  to  build  products  and   services around customer needs. Our deliverables of simple documentation, quick  credit approvals, competitive interest rates and other value-added services  have created a large, satisfied clientele for the company.

Internal Control and Adequacy

The company believes that Internal Control is a necessary concomitant of the principle of governance and has made conscious efforts to ensure quality in its deliverables and processes. The company has Board committees and Management committees, which are charged with strategic decision making, efficient and effective operations of the company and ensuring that good corporate governance policies, conforming to regulatory requirements are in place. The company has a well-defined organization structure, clearly defined authority levels well documented policies and guidelines approved by the Board and good in-house IT systems to ensure process efficiency. The company has put in place a mechanism to minimize operational risk by way of effective Internal Controls, Systems Reviews and an on–going Internal Audit program. The company has an in-house Internal Audit department, and the internal auditor undertakes comprehensive audits and reports directly to the Audit Committee of the Board. The Audit Committee of the Board reviews the internal audit reports, the adequacy of the internal controls and reports on the same to the Board.

Financial Performance 2021

Operational Performance
The year 2021 was a challenging year for the world economy as a whole. The company managed to retain its position in terms of its asset quality. Considering the delinquency issues triggered initially by the fall in global oil prices and then by the pandemic, we take pride in the company achieving a leadership position in the industry in maintaining quality assets and lowest NPA’s. This accomplishment has been achieved with careful planning and clear strategies, supported by sound vision and guidance by the Board. The company has successfully overcome the liquidity stress by maintaining a prudent mix of short term vs long term borrowing and consistently maintaining a liquidity buffer. The non-performing loans of the company are under control and the company’s existing Estimated Credit Loss level of RO 11.85 Million (including ECL on Deposits) is more than the provisions requirement of Central Bank of Oman. The non-performing assets coverage including the specific reserve for non-performing assets stands at 373.8%. The company maintained its Loan Book at the last year level of RO 105.6 million at the year end. The net operating income stood at RO 10.98 million as compared to RO 10.16 million in the previous year. The company was able to register a net profit of RO 2.56 million for the year 2021 producing earnings per share of RO 0.009. For all the regulatory purposes, the company’s net worth stands at RO 70.658 million, against the previous year figure of RO 69.262 million. The Book Value / Net Asset Value of the company’s share stands at RO 0.223. The company has proposed a dividend of 12% for the year 2021, comprising 7% cash and 5% unsecured non-convertible redeemable bonus stock bonds, which is subject to approval at the AGM. This would take the total pay-out since inception to 466.33%.

Human Resources

Employees are a critical part of our competitive advantage. We have sound Human Resource policies, on and off the job training, counselling and a scientifically designed reward system, which helps us to create a dependable, highly skilled and motivated work force. During the year the company maintained its Omanisation percentage.

Our Customer

AOFS is committed to delivering superior value through a powerful, distinctive branding which ensures better customer retention, better value and increased business with each customer. Our huge client base stands testimony to this fact.

Capital Structure

The Company’s objective of the capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholder value. The company manages its capital structure and makes adjustments to it in the light of changes in business conditions. No changes were made in the objectives, policies or processes during the current year. The Company’s lead regulator Central Bank of Oman sets and monitors capital requirement as a whole. The Company’s current paid up capital is RO 29.194 which is well above the regulatory requirement of RO 25 million.

Future Outlook

The company has reached its healthy position in the industry today after undergoing many business cycles under challenging economic circumstances. The company has also capitalized every single growth opportunity with its enviable strengths namely,

· Sound and innovative capital structure.
· Superior service to its loyal customers.
· Novel and valuable integrated business model.
· Lesser delinquency ratio due to very effective collection mechanism.
· Good provisioning for impairment.
· Timely product diversification.
· Consistent earnings.
· Highly automated IT real time systems and processes.
We remain focused on maintaining quality assets with the objective of consistent returns for all our stakeholders.
Our priorities for the coming year are:
· Cautious lending policies in all existing product lines.
· Products structuring & better packaging to suit the market demand.
· To manage the liquidity and costs judiciously to ensure sustainable earnings and profitability.
· Continue our leadership excellence and continue training and retaining the highly skilled and diverse work force.
· Offer superior delivery mechanism and personalised customer service to build customer loyalty and superior brand positioning.

From inception till date the company has been delivering on its commitment of increasing shareholders’ wealth. It’s a relentless pursuit of excellence and a commitment to continual improvement. Our endeavor is to constantly seek out new processes, products and efficiencies aimed at making things better for our customers. Our success is attributable to the dedication of our employees and our continued focus on keeping commitments to our stakeholders. Management believes that though weakening economy has an impact on all businesses and industries, the company has an operational and capital structure that can put it into the pedestal of growth as and when the opportunity arise. The sound guidance and encouragement from our Board of Directors has played a significant role in maintaining the asset quality and enhancing our profitability. Success is not final and failure is not fatal – we are committed to continue our legacy of excellence aiming to make AOFS an admirable and illustrious financial service provider for today and the next generation.

Chief Executive Officer

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