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Shariah principles which deal with pure halal investments can further build up the economy of Oman especially if they were to utilise Islamic
financial methods such as Ijara leasing and Istitnah which they have used pre- viously in 2006. As many neighbouring financial hubs are already tapping into the Islamic financial market. The eyes of the region, if the not the world, have been looking at the Oman banking sector with great interest over the last year and recognise increased potential for Oman to tap into the market
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third totalling $5148 US dollars worth of Is- lamic financial deals with Qatar close to Ku- wait with a total of $4088 worth of Islamic project deals.
The Landmark Islamic Financial Deal in 2006- The Sohar Aluminium Smelter
Project Islamic Finance Facility’ Although the Sultanate of Oman has not fully established Islamic financial institutions in the country they did make a landmark Is- lamic financial deal in 2006. This deal was called ‘The Sohar Aluminium Smelter Project Islamic Finance Facility’. The Sohar Alumin- ium Smelter Project was the first aluminium smelter to be built in the Middle East after 25 years which utilised Islamic financing methods.
Islamic Finance route.”(OER Online) Many other Omani financial institutions have de- cided to make Shariah compliant transac- tions such as the Citi Islamic Investment Bank based in Dubai as Deputy CEO of the company, Usman Ahmed said that the bank recently closed an Islamic tranche for the very first time with an Omani issuer which was the US$ 260 million Islamic facility for the Sohar Aluminium project.
AES Barka, the 427 MW gas fired power plant and 20 MIGD desalination plant, is also reported to have borrowed some of its project finance through Islamic Financial methods. A real estate sector company, and some leasing companies are also reported to be interested in considering the imple- mentation of an Islamic Finance route.
Most reports of implementation or interest in Islamic Finance in the Sultanate have been since 2010.
er of Oman Oil Company (the local sponsors of Sohar Aluminium) said in a statement regarding tapping into Islamic finance that, “We wanted to tap the other markets too. We wanted to expand our options. We were con- fident that such a scheme would work in the Omani environment. As for the future, we do not have any problem in approaching the
The table above shows the number of Islam- ic financial deals from the year of 2008. As
you can see from the table Oman has only 2 Islamic financial deals totalling a minimal number of $345 dollars in comparison to Saudi Arabia who had already been heav- ily involved in Islamic financial deals with a total value of $28,537. In addition other United Arab Emirate countries equated sec- ond with a total of $15,655. Kuwait came
The project was an important milestone in Oman’s economy and further expanded cap- italization of Oman’s oil and gas reserves. The financing plan for the project involved US$1.545 billion of external indebtedness and approximately US$900 million in equity. The commercial debt component consisted of a US$1.2 billion commercial bank tranche and a US$85 million letter of credit facility.
An important component of the financing was a US$260 million Islamic financing tranche. The Islamic financing tranche rep- resented, at the time of signing, the first Islamic financing tranche in a multi-sourced project financing in Oman. The US$260 mil- lion Islamic facility was arranged by leading regional and international banks: the Islamic arrangers were ABN AMRO Bank, Citibank, Arab Bank, Calyon, Gulf International Bank, West LB, Royal Bank of Scotland, Abu Dhabi Commercial Bank, BNP Paribas, Société Générale and Standard Chartered Bank.
Islamic financing tranches using the Istisnah (a sale of assets to be constructed) and Ija- rah (an Islamic lease)combination had been successfully used elsewhere in the Gulf in large financings, including the US$530 mil- lion Islamic tranche in the Qatar gas II fi- nancing in 2004 (Islamic Finance News).
Utilising the Istitnah and Ijarah Agree-
ments in Oman The Istisnah agreement operates during the construction phase of the Sohar Aluminium
2010 October Global Islamic Finance 61
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