Dubai: Omani banks have started offering Islamic banking services following the introduction of the Islamic Banking Regulatory Framework (IBRF) in December 2012.
“We anticipate that Islamic banking operations in Oman could capture a 6 per cent to 8 per cent share of system assets within the next three to five years and this share will likely stem primarily from the ‘conversion’ of customers from conventional to Islamic banking services. As a result, we expect that Islamic operations will capture a disproportionate share of the anticipated total system annual growth of 8 per cent to 10 per cent over the next three to five years,” Elena Panayiotou, Assistant Vice President — Analyst at Moody’s, said.
Banks are expected to incur sizeable costs to establish brand-new Islamic banking franchises and build operational risk management infrastructures that ensure Sharia compliance.
Oman’s central bank expect the Islamic banking units will enhance the overall banking services in the country. “The creation of Sharia compliant units will enhance competition among them and thus improve the banking services for customers and lowering its cost, as well as raising the level of financial inclusion and the growth of Islamic banking in general along with the traditional banking,” Hamoud Bin Sanjour Al Zedjali, Executive President of the Central Bank of Oman (CBO), said in a statement to Oman News Agency (ONA).
Although competition will likely intensify as new Islamic banks come into the market, bankers and analyst do not expect major changes in the Omani banking landscape in the next three to five years. This is because the new Islamic windows of the existing conventional banks, and particularly that of Bank Muscat will be well positioned to capture a large market share in Islamic banking given their ability to leverage existing customer bases and infrastructure.