Adnan Haider Darwish, CEO, Oman Housing Bank talks about the success, strengths and financial performance of the institution.
Oman Housing Bank’s mandate is to help citizens in the low and medium income bracket to acquire a house. Can you elaborate on the bank’s purpose and success?
Oman Housing Bank (OHB) was established in 1977 by the government. The idea behind the bank was to help citizens get their own houses. Since its establishment the bank has reached its intended goals. Since inception we have given more than 45,000 loans to Omani citizens and we have been recognised with a number of awards for our success.
The fact that we give subsidised loans accounts for a large part of our success. Our customers pay only a part of the interest on their loans with the rest being subsidised by the government. The subsidy amount from the government comes to the bank and we lend it back to other customers. This has helped the bank achieve more success with each passing year. The partnership between the government, customers and the bank is the key to our success.
You mentioned about the subsidy model. What is the value of the loans that OHB disburses to each customer and how much of the interest is subsidised by the government?
OHB offers a loan of RO60,000 to each customer and the subsidy depends on the income of the person. If his salary is upto RO400, he pays a one per cent interest per annum, with the rest being subsidised by the government. If a customer’s salary ranges from RO401-RO700, he pays a two per cent interest. For a RO701-RO1,000 salary the interest is three per cent, while for over RO1,000 the interest is four per cent. OHB charges an interest rate of six per cent on its loans in the market, but the rate changes according to the Central Bank of Oman’s guidelines. Overall, our model helps low income earners. Earlier we used to give out commercial loans but we have stopped it now as we have a huge waiting list of three years for our loans and are not in a position to give commercial loans due to liquidity constraints. Moreover, there are commercial banks which can give housing loans.
What is the eligibility for getting a loan from OHB and why is there a three year waiting period?
Any Omani who has a source of income and is 18 years of age is entitled to apply for a loan. We have a three year waiting period because of limited liquidity compared to the demand. In 2019 we gave loans worth RO60mn, while in 2018 we gave loans worth RO80mn.
Who are OHB’s shareholders and are they the main source of the bank’s capital?
Our capital comes from the government as we are 61 per cent owned by the government, with the remaining 39 per cent being owned by six pension funds. We have to find our liquidity from the market and we periodically take loans from the market. We are constantly on the lookout for banks that give loans to the housing sector at low interest rates. For example, we have borrowed from financial institutions in Kuwait and have taken loans from commercial banks like Bank Muscat and others. Such loans are not readily available
and they depend upon the prevailing market condition.
The government does not interfere in our day to day operations as we are an independent entity with our own Board of Directors. The government’s role is limited to giving us the difference between the interest rate that we charge in the market and the interest charged from customers as a subsidy.
How was OHB’s financial performance in 2019?
OHB posted good financial results in 2019 as we did not have problems related to non-performing assets or over dues from clients. This is because most of our clients work with the government and their instalments come directly to us. In addition, we found funds at good rates, which helped us and the government, who are our main stakeholder. Out profit in 2019 was RO16mn an increase of 20.8 per cent over 2018, but as I mentioned making a profit is not our motive as all of it gets recycled as loans in line with the government’s aim of giving loans to low and medium income citizens. In 2009 we gave loans worth RO60mn to over 1,000 people.
Is it getting progressively difficult to raise money from the market due to the challenging economic situation?
It depends on the economic environment, and we are hopeful that this year will not be as difficult in terms of finding funds. We find that there are international and regional economic problems, but Oman is negotiating things well. OHB is in a better position as the instalments paid by our clients work as a source of funds. We get around RO40mn worth of yearly instalments from our clients.
What is the tenure of the loans given by OHB?
It is around 25 years.
Have you faced problems of non-performing assets?
No we do not have NPA related problems as our instalments are around 60 per cent or less of our client’s salary, enabling them to pay their instalments easily. Another factor is that since the year that they start paying their instalments, their salaries have gone up, making it easier for them to service their loans.
Does OHB compete with commercial banks as they also disburse housing loans?
The mandate of commercial banks is to attract and service people with higher income and not people with low or medium incomes. For instance, commercial banks give loans to people who are looking at buying houses for rent and not for stay. In contrast, we are looking at people who want a house to stay and this is a big difference between us and commercial banks and hence we do not compete with them. Anyone who has a house is not eligible for our loans.
The government has been under a lot of challenge due to the subsidy burden, has this impacted the government’s ability to subsidise OHB’s interest rates?
Late His Majesty Sultan Qaboos bin Said mentioned at the beginning of the Blessed Renaissance that it was his priority that every Omani citizens should have a house of their own so that they could live peacefully and happily with their family. This is a truism because a person who has a house feels settled and at ease.
How long have you been associated with Oman Housing Bank and how has the experience been of working in a bank with a social cause?
I joined the bank in 1983 after I graduated from Jordan. Since then I have worked with this bank in different areas becoming the CEO position from the end of 1999. As a person I like to be associated with social causes which help in the welfare of people.
What are your views on Oman’s economic prospects for 2020?
I think Oman with its young generation of Omanis will be better than before. While some people are pessimistic, I am confident that any problem that one may have will be solved if you have good people. I find the new generation of Omanis to be really good, as they are well educated and hard working. Once you have this quality of people, one is no longer afraid of anything.
What is your advice for young Omanis embarking upon a career?
The young generation should not get frustrated soon and keep trying. If they are not successful at the first go, they should continue working towards their goal. I can confidently say that persistence and hardwork pays dividends. If youngsters do not succeed at one thing, they will surely succeed at something else. Moreover if you only think negatively you will not succeed, so it is important to be positive.