Muscat- The Central Bank of Oman (CBO) has launched an electronic system to provide Sharia-compliant liquidity management tools to licensed Islamic banking institutions in the Sultanate.
The structures of these instruments and their related contracts were approved after review by the Supreme Sharia Supervisory Board of the Central Bank of Oman, in accordance with regulatory requirements and Islamic Sharia principles. The first phase includes the launch of the Qard Hasan and Restricted Mudaraba instruments to inject liquidity in Omani riyals into the banking sector.
Under these two instruments, the Central Bank of Oman provides liquidity to Islamic banking institutions in exchange for acceptable collateral in the form of Sharia-compliant securities. Islamic banking institutions, acting as speculators, invest this liquidity in Sharia-compliant instruments.
The electronic system also enables the issuance of government securities, including Islamic treasury bills and sukuk, and the introduction of instruments to absorb excess liquidity from the banking sector, which will be implemented in later stages.
The aforementioned system is the first of its kind in the Middle East and North Africa region, given the multiple and diverse liquidity management tools it provides, which serve monetary and fiscal policy purposes in accordance with the provisions of Islamic Sharia.
This electronic system is integrated with the national infrastructure systems for financial markets, as it is linked to the Real Time Gross Settlement (RTGS) system and the clearing system of the Muscat Clearing and Depository Company (MCD).
It is worth noting that the launch of this system complements the Central Bank of Oman's efforts to provide Sharia-compliant liquidity management tools to Islamic banking institutions in the Sultanate of Oman, which began with the launch of the US dollar-denominated money market instrument in December 2022.
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