MUSCAT, 01 November 2014 – Meethaq, the pioneer of Islamic banking in Oman from Bank Muscat, in a strategic partnership with Thomson Reuters, the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank, and the General Council for Islamic Banks and Financial Institutions (CIBAFI), launched the Oman Islamic Finance Report 2015 during the 10th World Islamic Economic Forum in Dubai. The report is the latest in the series of Islamic Finance Country Reports (IFCR) designed to provide key insights on the development of Islamic finance in markets where the industry is new and emerging.
Based on a combination of primary and secondary research, including an exclusive retail consumer survey and exclusive interviews with leading stakeholders, the report highlights that Islamic banking assets in Oman have grown to $2.8 billion in June 2014, or 4.4% of total banking assets, since the launch of Islamic finance less than two years ago in January 2013. This growth is expected to continue and Islamic banking assets are projected to grow to between $5 billion to $7 billion by 2018.
The growth is driven by a combination of the enabling environment being fostered by regulators and a young, Shari'a-sensitive population. The consumer survey highlighted the demand from the retail segment for banking solutions that are truly “Islamic", with 74% of respondents stating adherence to Islamic rules as the most important factor for dealing with Islamic banks.
H.E Hamoud bin Sangour Al Zadjali, Executive President of the Central Bank of Oman, in an exclusive interview in the report said: “Islamic banking providers are actively working to reach out to the market more and more in a bid to increase market share by capitalising on market enthusiasm. They are also leveraging on existing conventional banking connections and tapping into the unbanked population. We believe the capacity building and market response to be quite positive."
There has to be continued government support to facilitate effective operations of Islamic banks, the report notes, including the provision of solutions for liquidity management. Oman's domestic Islamic banking sector will also benefit from greater cross-border harmonisation of Islamic finance standards and practices.
Sulaiman Al Harthy, Group General Manager - Meethaq Islamic Banking, said: “Apart from Islamic liquidity management, the challenge is in tackling long-term funding requirements, as our flagship product is home finance with long-term maturities. Subject to regulatory approvals, Meethaq is considering issuing a sukuk, which will be the first sukuk by any Islamic bank in Oman to address the long-term funding requirements."
Professor Dr. Mohamad Azmi Omar, Director General of IRTI, said: "With strong economic growth projections, significant government expenditure on infrastructure projects and a young, Shari'a-sensitive population, Oman has all the ingredients required for a successful Islamic finance sector."
This emphasises the need to implement consumer awareness and education campaigns to better explain Islamic finance to the consumer segment. The report highlights how banks in Oman could gain control over this issue through marketing communications to better position themselves in the eyes of the public. Improving the level of Islamic finance awareness would help to promote Islamic banks in Oman. Banks in Oman must focus on the main value proposition of Islamic finance when advertising and marketing their services, the report noted.
In addition, the report underlined the need to develop local Islamic finance professionals to carry the industry forward, in line with the broader government strategy of reducing dependence on foreign expertise.
The eeport also explores unique opportunities in Oman, such as the growth potential for general takaful (via bancatakaful tool) and opportunities in broader Islamic economic sectors such as tourism and pharmaceuticals.
Dr. Sayd Farook, Global Head of Islamic Capital Markets, Thomson Reuters, said: “Oman has set up a strong and holistic infrastructure for Islamic finance that has achieved remarkable growth in the span of only two years. The growth is expected to continue to increase given the regulator's continuous engagement with the market, adapting to rapidly changing market conditions and focusing on addressing key domestic challenges such as Islamic liquidity management."
Abdelilah Belatik, Secretary General of CIBAFI, notes: “Islamic banks in Oman should focus more on customer education and awareness to take full benefit of the market potential. The country must also cater to and reach the growing Islamic economy worldwide."