Oman’s Islamic banks and window operations have shown a robust year-on-year growth of 31.82 per cent (OMR700 million) in financing at OMR2.9 billion by the end of September 2017, as against OMR2.2 billion in the same period last year. Such robust growth in Islamic finance shows that Sharia-compliant banks have been able to establish themselves in the market and 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 taken by these institutions to build a strong network of branches across the country and create awareness on Sharia-compliant products and services.
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.
A similar growth was witnessed in total customer deposits, which rose by 40 per cent to OMR2.8 billion by the end of September 2017, from OMR2 billion in the same period last year, according to the latest monthly bulletin released by the Central Bank of Oman. These achievements of the Islamic institutions were made possible despite the challenges this year, in the aftermath of a slump in the 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 also by providing consumers the benefit of choosing between both conventional and Islamic banking products.According to an earlier report, the banking penetration level in Oman is around 14-16 per cent, compared with an average penetration level of 20 per cent in the Gulf. This gives ample room for Omani institutions to grow, especially in the interior towns. 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. The total assets of Islamic banks and windows stood at OMR3.6 billion by the end of September 2017, constituting 11.6 per cent of the total banking assets.