The Royal decree issued by His Majesty Sultan Qaboos bin Said in May 2011 heralded the launch of the country’s Islamic banking sector and the creation of its first two dedicated Islamic financial services institutions: Bank Nizwa and Al Izz International Bank.
Based on the ethical principles of Islamic law (also known Shariah), Islamic finance involves the sharing of profit and loss and the prohibition of the collection and payment of interest.
Established conventional lenders in the sultanate have also since opened Islamic windows to offer Shariah-compliant products and the sector registered a more than 30 per cent growth rate in its first two years.
In 2012 both new banks floated initial public offerings (IPOs), following the requirement by the Central Bank of Oman (CBO) that they list at least 40 per cent of their shares. Both IPOs were heavily oversubscribed, indicating whetted appetites in the region for Islamic products on the Muscat Securities Market (MSM) – which in September launched its new index for Shariah-compliant companies.
“The CBO is confident that the advent of Islamic banking will have a positive impact on the economy. Oman offers a large potential for the growth of Islamic banking, opening up new segments and players both from banks within and investors from abroad and thus providing opportunities for new foreign investments,” says CBO’s Executive President Hamood Sangour Al Zadjali. “Its inclusion will add to the competitive environment, providing the consumers the benefit of choosing between both conventional and Islamic banking products.”
Dr Jamil El Jaroudi, CEO of Bank Nizwa, says the new products pique the interest of many people who want to marry their economic lives with their ethical beliefs and adds: “Although we only started with three branches, sometimes we receive more than 1,000 visitors per day asking not just to open accounts, but also to learn more about the industry. So it shows that there is still a lot of awareness work to be done.”