Islamic banks and window operations have a combined market share of 11.6 per cent in Oman’s total bank assets.
According to the latest monthly report released by the Central Bank of Oman (CBO), the combined assets of Islamic banks and window operations had touched OMR3.6 billion by the end of June 2017, constituting 11.6 per cent of total bank assets.
Despite being a relatively young industry, Islamic banking has grown by leaps and bounds, gaining momentum on the back of continuous innovation, better products and customer service.
Islamic institutions had registered a year-on-year growth of 33.3 per cent in financing to OMR2.8 billion by June-end this year, up from OMR2.1 billion for the same period a year ago. Total deposits held by Islamic financial institutions also surged by 50 per cent to OMR2.7 billion by the end of June 2017, from OMR1.8 billion for the same period of 2016, added the monthly report.
Such robust growth in Islamic finance shows that Sharia-compliant banks are able to establish themselves in the market and able to overcome their teething problems. Islamic financial institutions have achieved remarkable progress on various fronts within a short span of four years, thanks to the efforts made by these institutions in building a strong network of branches across the country and creating awareness about Sharia-compliant products and services.
These achievements of Islamic institutions are despite challenges in recent years in the aftermath of a slump in oil prices and its negative effects on credit and money markets. There have been considerable increases in the number of branches and assets held by these entities. Islamic banks are opening up new segments and players and, thus, adding to the competitive environment, not only in terms of efficiencies and innovations, but by also providing consumers the benefit of choosing between both conventional and Islamic banking products.
The banking penetration level in Oman is in the region of 14 to 16 per cent, which is against an average penetration level of 20 per cent in the Gulf. This gives ample room for Omani institutions to grow, especially in interior towns. The project finance field also offers room for extending financing.
In other words, there is still space for Islamic banks to grow further, although there are challenges ahead. Sharia-compliant institutions will get clients from those who switch over from conventional banks and those who never use a bank.
In Oman, two Islamic banks—Bank Nizwa and Alizz Islamic Bank—along with the window operations of six conventional banks, have scores of branches across the country.