Capital Market Authority plans to issue Takaful regulations this year

Executive regulations governing Takaful activities (Shariah-compliant insurance services) are currently under finalisation and will be issued hopefully this year, according to the Executive President of the Capital Market Authority (CMA) of the Sultanate.

Abdullah bin Salim al Salmi (pictured) said the new regulations, currently under review by the Ministry of Legal Affairs, will help spur the growth of an already thriving Takaful industry in Oman.

Presenting the keynote address at the IFN Forum Oman held at the Grand Millennium Muscat on Tuesday, Al Salmi said the Takaful industry has posted premiums totalling RO 53.16 million last year, representing 11.40 per cent of total insurance premiums (conventional and Islamic alike) in the Sultanate.

“This is commendable growth, as six years ago, both the Islamic capital market and the Takaful market’s value contribution to the overall capital market and insurance market in Oman was non-existent,” the Executive President observed.

The day-long conference was organised by Singapore-based REDMoney, publishers of Islamic Finance News (IFN), in partnership with the Capital Market Authority (CMA) of Oman.

Earlier, Al Salmi traced the remarkable growth of the Islamic Banking and Capital Market industry in the Sultanate over its relatively short existence. While the Islamic Banking segment now features two Islamic banks and six Islamic banking windows, the Islamic Capital Market sector has burgeoned as well, he noted.

This is evident from, other things, the launch of the MSM Shariah Index for the Muscat Securities Market with 31 Shariah-compliant listed companies currently listed on the Muscat bourse, the establishment of three Islamic investment funds, and the issuance of three Omani sovereign Sukuk and four corporate Sukuk with various structures both in Omani Riyal and US Dollar. In addition, two Takaful operators are currently licensed in the local Takaful market, he pointed out.

Also boding well for the growth of the Islamic capital market are Real Estate Investment Trusts (REITs), said the Executive President. He noted in this regard the CMA’s recent announcement granting initial approval for the issuance of Oman’s first REIT under the name of Aman REIT Fund, by the local Thara Group, with a size of RO 20 million.

At the same time, the Authority is also reviewing a second REIT, named Izdihar Barka REIT Fund, with assets of RO 11 million and managed by Bank Muscat. Also on the anvil is a 2nd Meethaq Sukuk issuance through a public offering to retail investors under its RO 100 million Sukuk programme.

“The various Sukuk being issued thus far will certainly contribute towards building the benchmark yield curves in Oman and hopefully spur further Sukuk issuances in the market,” he stated.

Al Salmi underlined in this regard the importance of enabling legislation that is helping drive the growth of the Islamic finance industry in the Sultanate. Notable examples include the dedicated Sukuk Regulation, REIT Fund Regulation and the Takaful Law.

In particular, the new Commercial Companies Law (CCL) promulgated recently by Royal Decree promises to provide more “flexibility and efficiency” in the issuance of capital market products, including bonds and Sukuk, said the Executive President.

“Under the new CCL, all corporate transactions undertaken by public joint stock companies will be supervised and come under the CMA’s authority. This will enhance the efficiency in the process and make the CMA as a one-stop centre. The CCL also allows for the creation of Shariah-compliant companies with specific guidelines,” he explained.

Furthermore, the CMA is working continuously to enhance and develop the “building blocks” necessary to ensure an effective and dynamic Islamic capital market and Takaful market in Oman, said the official. Some of these initiatives have borne fruit, with the Islamic capital market having burgeoned in value to RO 1.91 billion as of end-2018 (comprising of Shariah-compliant shares, investment funds and Sukuk) representing 10.37 per cent of the total capital market value (conventional and Islamic combined). This figure does not include the additional sovereign Sukuk issuances issued by the Omani government through the Ministry of Finance outside of Oman, totalling $2.5 billion thus far.