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Ghassan Chammas Consultant Blom Development Bank

Ghassan Chammas Consultant Blom Development Bank Session III: Supporting Oman Real Economy and Entrepreneurships Oman Second Islamic Banking & Finance Conference. A roadmap to sme support. The Lebanese experience. Sufficient TENURE- profit cycles. SME ally#1: ample time.

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Ghassan Chammas Consultant Blom Development Bank

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  1. GhassanChammas • Consultant • Blom Development Bank • Session III: Supporting Oman Real Economy and Entrepreneurships • Oman Second Islamic Banking & Finance Conference

  2. A roadmap to sme support The Lebanese experience OMAN 2nd Islamic Banking & Financial Conf. March 2013

  3. OMAN 2nd Islamic Banking & Financial Conf. March 2013

  4. Sufficient TENURE- profit cycles SME ally#1: ample time OMAN 2nd Islamic Banking & Financial Conf. March 2013

  5. Sufficient tenure for development Time to Destination… Development and maturity Start-Up… OMAN 2nd Islamic Banking & Financial Conf. March 2013

  6. Amortization plan. We can help! Not all reimbursement schemes are +pmt()! OMAN 2nd Islamic Banking & Financial Conf. March 2013

  7. OMAN 2nd Islamic Banking & Financial Conf. March 2013

  8. Principal - Profit Principal-Profit dilema BURDEN DEBT Big Accm Profit Small P OMAN 2nd Islamic Banking & Financial Conf. March 2013

  9. SUBSIDY SME subsidy Small P Subsidy EASYY DEBT Profit OMAN 2nd Islamic Banking & Financial Conf. March 2013

  10. SUBSIDY How can you subsidize • Usually governments subsidize “The INTERESTS” paid by SME’s. Although linguistic, the law does not cater for “PROFIT” subsidies. • Lebanon case: We have a law subsidizing “interests” to some supported sectors: Agriculture, industrial, IT and software development, Touristic projects, environmental friendly projects. BUT, ISLAMIC BANKS CLIENTS CANNOT ACCESS IT. • Subsidies come from various sources: EC, IFC, NGO’s, Government (s), Central Bank, etc… • The challenge is how can you create an Islamic financial engineered structure to include the subsidy within the offered facility to your client OMAN 2nd Islamic Banking & Financial Conf. March 2013

  11. SUBSIDY How can you subsidize • One easy way is to establish a HIBA system. Some fiscal laws are not very friendly with the idea. • If the subsidy offers the capital at low cost, establish a special purpose vehicle to isolate and package the facility from SPV to client through financial entities. RED TAPE? Maybe, it depends on jurisdictions. • If subsidy is to the interest on the capital advanced by the banks to SME, then very difficult to channel the subsidy to islamic facilities, unless expressed in its charter as paying part or all of the profit: QardHasan from bank + profit as Hiba ; or facility at low profit margin and supplemented by subsidy OMAN 2nd Islamic Banking & Financial Conf. March 2013

  12. SUBSIDY How can you subsidize • If subsidy is from CB, then CB sells commodity to IB at a low murabaha rate, so the IB liquidates commodity spot and pass it through to SME via an Islamic financial instrument: Lebanon. Requires strict monitoring to IB from BCC to make sure the principal is channeled to SME’s. • The market requires intelligent set ups to make sure the SME’s are supported properly. OMAN 2nd Islamic Banking & Financial Conf. March 2013

  13. IN BRIEF • GIVE AMPLE TIME TO PAYBACK • CUSTOMIZE AMORTIZATION PLANS • INCRUST EXISTING SUBSIDIES INTO ISLAMIC FINANCIAL SCHEMES • Q&A GHASSAN CHAMMAS ADVISOR TO THE BOARD Blom Development Bank. SAL Beirut - Lebanon www.blomdevelopment.com ghchammas@gmail.com OMAN 2nd Islamic Banking & Financial Conf. March 2013

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