Oman does not suffer from a shortage of SME funding. It suffers from a failure to convert small businesses into scaled economic output.

Despite sustained reform efforts, new authorities, and the launch of Future Fund Oman, small and medium enterprises still contribute only around 33 percent to non-oil GDP.

In the United Arab Emirates, SMEs account for roughly 63.5 percent. The gap is not marginal. It represents billions of riyals in unrealized output and a clear signal that the two countries are operating different economic systems, not simply progressing at different speeds.

Oman has built the visible architecture of an SME ecosystem. It has incubators, funds, mandates, and strategies. What it lacks is the underlying machinery that turns firm creation into firm growth, growth into exports, and exports into repeatable capital formation. The result is a ceiling. Businesses form, but few scale. Capital is allocated, but rarely multiplied.

Understanding how the UAE broke through that ceiling offers a clear roadmap for what Oman must change if it intends to double SME contribution by 2030.

Two Systems, Not Two Economies

Oman and the UAE share geography, culture, and the same strategic objective of reducing oil dependence. The difference lies in how each state manages risk within the private sector.

The UAE treats SME growth as a system design problem. Risk is transferred away from entrepreneurs and banks through guarantees, insolvency protections, and market access. Oman, by contrast, places most of that risk on the firm itself. As a result, rational actors behave conservatively.

This difference explains why policy intent alone has not delivered comparable outcomes.

Where the Gap Actually Appears

The divergence is visible across the entire SME value chain.

SMEs contribute around 33 percent to Oman’s non-oil GDP, compared to approximately 63.5 percent in the UAE. SME access to bank credit in Oman remains at 3.7 percent of total lending, below the Central Bank of Oman’s own 5 percent target. In the UAE, SME lending stands closer to 9.5 percent.

Market orientation compounds the problem. Omani SMEs are overwhelmingly domestic, concentrated in retail, construction, and low-margin services. UAE SMEs are structurally outward-facing, embedded in trade, logistics, professional services, and re-export activity. Employment figures reflect this imbalance, with SMEs accounting for 76 percent of private sector employment in Oman versus roughly 86 percent in the UAE, but generating far less value per worker.

These indicators reinforce each other. Limited finance discourages scale. Domestic focus caps margins. High failure risk suppresses ambition.

Liquidity Exists, Risk Transfer Does Not

The most consequential difference between the two systems is not capital availability, but risk allocation.

In the UAE, banks lend to SMEs because they are not fully exposed to default risk. Institutions such as Emirates Development Bank provide credit guarantees that absorb a large share of potential losses. Lending targets are backed by balance sheet protection.

In Oman, the Central Bank sets lending targets without providing comparable guarantees. As a result, commercial banks behave rationally. They avoid SME exposure, regardless of policy rhetoric.

Future Fund Oman has partially addressed this gap by providing direct and co-investment capital through platforms such as Beehive. This improves liquidity, but it does not change bank behavior at scale.

Without a state-backed credit guarantee scheme covering 75 to 80 percent of default risk in priority sectors, SME lending will remain constrained. Targets alone do not move credit committees. Guarantees do.

Domestic Saturation vs External Pull

Omani SMEs are built to serve Muscat. UAE SMEs are built to serve markets.

The UAE embedded its SMEs into global supply chains through ports, free zones, and trade finance. A small firm in Jebel Ali is often selling to East Africa, India, or Central Asia, not only to Dubai.

Oman’s SME base remains tied to domestic demand and public sector contracts. Programs such as In-Country Value have strengthened local participation in oil and gas supply chains, but they also anchor firms to a finite market.

The next phase must shift from protection to expansion. Duqm and Salalah are trade assets, not only infrastructure projects. Certified Omani SMEs should be supported to bid for contracts in Saudi giga-projects and African logistics corridors.

Export enablement, not import substitution, is the missing policy layer.

Failure Is Still Punitive

Risk-taking requires a credible exit.

The UAE modernized its insolvency framework by decriminalizing bounced checks and creating clear restructuring pathways. Entrepreneurs can fail, reset, and return.

Oman introduced a Bankruptcy Law in 2020, but practical implementation remains slow and intimidating for small firms. Insolvency procedures are complex, and the social and legal consequences of failure remain severe.

This shapes behavior. Entrepreneurs avoid debt. Banks avoid lending. Firms avoid scale.

A fast-track SME insolvency process, limited to firms below a defined revenue threshold, would materially change incentives. Business failure must be treated as a financial outcome, not a moral judgment.

Talent Density Still Matters

Capital without talent does not produce ecosystems.

The UAE’s Golden Visa decoupled residency from employment and sponsorship, allowing founders to build companies without structural dependency. This attracted global talent and increased firm density.

Oman’s investor visa framework exists, but entry thresholds remain high for early-stage founders. This limits the inflow of technical and commercial co-founders who could complement local entrepreneurship.

A founder-specific visa, vetted through ASMED or Future Fund Oman, would allow the country to import capability without diluting national ownership. Talent is a multiplier, not a substitute.

From Ceiling to Floor

The difference between 33 percent and 63 percent is not effort. It is system design.

Oman has addressed capital availability. What it lacks is velocity. Banks must lend closer to 9 percent of their portfolios, not 3.7 percent. SMEs must sell to Riyadh and Nairobi, not only to Muscat. Failure must be survivable. Talent must be mobile.

If Oman aligns regulatory speed with funding ambition, the 33 percent figure will stop being a ceiling. It will become the floor from which a mature, export-driven SME economy finally grows.