Islamic banking sector total assets surpass 15% market share in Oman

Muscat (ONA): Islamic banking sector in the Sultanate of Oman has accomplished a major milestone at the end of June 2021 when total assets of islamic banking entities surpassed 15% market share in the banking sector.

International organizations such as International Monetary Fund (IMF) and islamic Financial Services Board (IFSB) consider a jurisdiction with 15% market share as “systemically important islamic banking system”. As per IFSB Stability Report 2021, Oman has become 15th country in the world that has achieved this market share.

Since the license of first Islamic bank in Oman in December 2012, this landmark market share has been achieved in eight and half years with the active participation of two islamic banks and give islamic banking windows of conventional banks. Currently, Islamic banking entities are operating a total of 94 branches in most geographical areas of Oman.

On this occasion, Executive President of the Central Bank of Oman (CBO) Tahir Salim Al Amir State, “I am glad that Islamic banking sector in Oman has continued to expand its outreach and exhibited consistent growth since its introduction eight years ago. Backed by robust legal, regulatory and Shari’a governance framework for Islamic banking sector promulgated by the CBO, this sector has offered an additional option to public for meeting their saving and financial needs, which has enhanced financial inclusion and boosted national saving and investment in Oman.”

He further mentioned that “Introduction of Islamic banking in Oman has helped corporates and businesses to raise, mange and grow their capital and investment and diversify their funding sources, which has advanced entrepreneurship, competitiveness and diversification in the economy. Similarly, the licensing of new players has expanded the sophistication and range of products in the financial sector, leading to more efficiency through better service quality, product innovation and digitization.”

Islamic Banking sector in the Sultanate of Oman has witnesses consistent and rapid growth since its introduction, with a combined average annual growth rate of 30.3% between 2013 and 2020.

As of June 2021, Islamic Banking sector assets in Oman reached RO 5,679 billion (equivalent over USD 14.7 billion), with a market share of 15.13%. Similarly, market share of Islamic banking in gross financing and total deposits reached 16.9% and 16.8% respectively on this date. This robust growth has been backed by high asset-quality with a low non-performance financing ratio of 1.93% as at December 2020. Moreover, other stability indicators of Islamic banking sector all exceeded regulatory requirements with average capital adequacy ratio at 15.61% against CBO requirement of 12.5% as well as liquidity coverage ratio and net stable funding ratio of 116% and 119% against 100% requirement. Within the Islamic banking sector, two full-fledge Islamic banks contributed 41.3% of assets as at June 2021 which was only 27.2% as at December 2015.

The Central Bank of Oman (CBO), as a part of its efforts to contribute to global policy dialogue on financial stability and development of new international standards, has strengthened its partnership with Islamic finance standard setting bodies and international organizations in the past few years, which has enabled CBO management and staff to become part of their key committees and working groups. Similarly, these collaborations have allowed the Central Bank to host capacity budding events, awareness and training programmes and policy development meetings in the Sultanate of Oman. The Central Bank will continue to build on these partnerships for strengthening its regulatory and supervisory framework for Islamic banking sector and expanding its outreach to all segments of population.

In order to ensure sustained growth and optimum contribution of this sector to the Omani economy as well as banking sector, CBO is preparing a new strategy for Islamic banking sector development. Main pillars of this strategy outline initiatives that focus on improving the existing regulatory infrastructure and consumer protection frameworks, augmenting product range offered by this sector and strengthening stakeholder coordination. Similarly, initiatives are also being envisaged to expand the outreach, nurturing Omani talent and boosting the awareness about the value proposition of Islamic finance products and services.