World Islamic Finance Review gif
US$ Billions Assets
100 200 300 400 500
0 CAGR~22% CAGR~28%
US$ Billions Revenues
10 20 30 40 50
2003 2004 2005 2006 2007 2012e Source: bankscope, Oliver Wyman analysis
that liquidity and attractiveness will come to the Islamic Finance market.” Oman’s finan- cial sector had appeared relatively sheltered from global financial turbulence as a result of the banking sector’s conservative prac- tices, which had reduced contagion risks. However, recent events have increased risks in the financial sector and undermined in- vestor confidence.
The turmoil at the Saudi-based Al Gosaibi and Saad groups, two of the region’s larg- est family-run conglomerates, has spread throughout Gulf markets as banks moved to limit their exposure to both companies after their accounts were frozen in Saudi Arabia in June, when it was revealed that Bank Muscat and the National Bank of Oman had lending exposure worth USD171m and US- D17m respectively to the Saudi family trad- ing groups at the centre of an international credit default crisis.
Thus far, it is not clear what provisions the banks may take against their loan exposure; however, this episode underlines increas- ing nervousness in Oman’s financial sector. (DNB Country Risk). Oman could further avoid the potential risks of debt if they utilize ethical modes of Islamic financing to man- age their investments and wealth in particu- lar lucrative and profitable industries such as the country;s oil sector.
The Future of Islamic Finance in
Oman The Sultanate here of Oman has made a few milestones in establishing their presence in the Islamic financial sector. In analysing the progress made so far it becomes apparent that there is need for further prominence of the Islamic financial sector. A formation of a Shariah board and a set up of fully fledged Islamic financial institutions could further help to diversify the future of Islamic financ- ing in Oman. With a predominantly Muslim population there is much scope for the utili- zation of Shariah compliant products in com-
parison to using conventional methods of fi- nancing. 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 previously 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 bank- ing sector with great interest over the last year and recognise increased potential for Oman to tap into the market.
Although the country may be hesitant to di- versify into religious principles with business and investments the ethical modes used in Shariah finance can further help to manage wealth in the country. Establishing key regu- latory bodies with Islamic institutions can further diversify the sector. Bank Muscat for example is a successful bank which is operating from Saudi Arabia but has derived from Oman.
The Abu Dhabi based Arab Trade Finance Program and Bank Muscat reportedly signed a line of credit agreement which totalled to a staggering $35 million in June 2010 which was to be used in utilising and financing the Sultan of Oman foreign trade.
Chairman of Bank Muscat, Shaikh Abdul Ma- lik al Khalili expressed that the role that the Arab Trade Finance program played is com- mendable and through the financing of fur- ther facilities, products and services it can create exceptional further progression in constructive tasks and developmental sup- port of intra Arab trade and in can improve capabilities of the Arab producers and ex- porters and leave scope for utilising Islamic financing methods. With further encourage- ment from neighbouring Islamic financial hubs such as the UAE and Saudi Arabia, Oman may decide to create opportunities
for fully fledged Islamic banks and financial institutions in the country. The Sultanate of Oman needs to look into the demands from the population and cater to the needs of people wishing to use Shariah compliant products from fully fledged Islamic financial institutions.
The key developments and debates that Oman has been discussing since 2006 has not yet materialised and there still needs to be a formation of a fully fledged Islamic fi- nancial bank or institutions within the coun- try.
Oman has the potential to be a thriving Is- lamic financial hub given the perfect loca- tion, predominant Muslim population as well as being next to prominent Islamic hubs. The Sultanate of Oman needs to further imple- ment ways and pave the way for the Islamic financial industry which is set to soar to over $1.5 trillion US dollars by 2012.
gif 0 CAGR~20% CAGR~44%
2003 2004 2005 2006 2007 2012e
Additional Reading:
http://www.menafn.com/qn_news_ story_s.asp?storyid=1093124980
http://www.dnbcountryrisk.com/FreeSa- mples/samplefiles/SampleGlob30809. htm-
http://www.oeronline.com/php/2006_ june/
cover.php
http://www.theoildrum.com/node/6174 – source oil
http://www.islamicfinancenews.com/ HanbookPDF/36.Sohar.pdf
http://www.islamicfinancenews.com/ HanbookPDF/36.Sohar.pdf
2010 October Global Islamic Finance 63
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