With a share approaching a noteworthy 16 per cent of total banking assets, Oman’s rapidly growing Islamic banking sector is now deemed a “systemically significant” segment of the country’s vital banking services industry, a high-level official of the Central Bank of Oman (CBO) announced here on Monday.
Malik Abdullah al Mahrooqi (pictured), Advisor at the Office of the Executive President of the CBO, affirmed the Islamic banking sector’s growing importance at IFN Oman Forum 2022, a daylong conference organised by Redmoney Events in cooperation with the Capital Market Authority (CMA).
The designation of the Islamic banking sector as a “systemically significant” segment, Al Mahrooqi said, comes on the 10th anniversary of the issuance of a circular by the CBO unveiling the Islamic Banking Regulatory Framework – a key milestone that heralded the debut of shariah-compliant financial services in the Sultanate of Oman.
“The Islamic banking and finance services sector in Oman has come a long way since then, with two full-fledged Islamic banks and five Islamic windows,” said Al Mahrooqi. “The market share of the Islamic banking sector reached 15.9 per cent of total assets of the banking sector as of June 2022. In terms of both market share and asset size, Oman has now become the 15th largest Islamic banking market in the world, out of 70 countries where Islamic banking is present. Similarly, with the passing of the 15 percentage point in market share, Islamic banking has become a systemically significant segment of the financial sector in the Sultanate,” the official stated.
Listing other highlights of the sector’s performance, Al Mahrooqi said loans provided by the Islamic banks and windows accounted for 19.9 per cent of total loans of the banking industry, while Islamic deposits reached 17.9 per cent of total deposits as of June 2022.
“This market share is in response to year-on-year growth of 10.9 per cent for total financing and 13.6 per cent for total deposits between June 2021 and June 2022. This asset growth is backed by a lower non performing ratio of 1.9 per cent as of June 2022. Similarly here, profit before tax of Islamic Banking entities has shown an increase of 10.9 per cent for the first two quarters of this year.”
The sector has also grown geographically as well, having expanded its presence across various governorates, according to the official. Islamic banking services are now provided via a network of around 100 branches, supplemented by onsite banking, mobile banking units, as well as online and mobile banking platforms, he said.
Citing the latest Financial Stability report issued in August this year, Al Mahrooqi said the Islamic banking sector in Oman is expected to “sustain its positive trajectory in the short to medium term”.
Growth will be driven by growing awareness, strong retail demand for Islamic products, supportive regulation, a strong push from Islamic windows of conventional banks, an improving operating environment, positive real GDP growth, and higher oil prices, he said.
With a view to further bolstering this outlook, the Central Bank of Oman is preparing the ground to enable Islamic banks and windows to offer shariah-compliant liquidity products, he said. Further support will come in the form of lender of last resort / liquidity support facility, and remuneration on deposits with the Central Bank. The overall goal is to strengthen the entire ecosystem underpinning this key sector, he noted.
“A few months ago, the Higher Shariah Supervisory Authority reviewed and approved the contract structures of these products. Now efforts are being made to complete the remaining groundwork and gradual offer these products to the market players,” he added.
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