(MENAFN- Muscat Daily) Islamic banking in Oman is expected to grow at double-digit rates as shariacompliant banking products increasingly gain acceptance and the government's plans to ease restrictions come to fruition according to a study by Thomson Reuters.
The sector which comprises two dedicated sharia-compliant lenders and six commercial banks with registered Islamic banking windows currently represents more than four per cent of Oman's total banking assets but this may increase to ten per cent by 2018 a press release said.
If the best-case scenario for asset growth is achieved. Under a base scenario the study estimates Islamic banking assets could reach RO5bn by 2018 a seven per cent share of estimated total assets.
Launched in 2012 Oman's nascent Islamic banking segment saw assets surge more than fivefold to RO1.1bn at the end of the second quarter of 2014.
However such a formidable growth rate may require further regulatory assistance according to the study. In particular it identified the need for shariacompliant liquidity management instruments to open up the interbank market. Regulations currently ban the use of commodity murabaha a money market contract widely used elsewhere in the Gulf.
Hamood Sangour al Zadjali executive president of the Central Bank of Oman (CBO) said the government was moving to respond to market calls to relax some of the existing restrictions and had set up a taskforce to develop sharia-compliant liquidity management tools. He added that the banks needed to expand their product range.
Despite growth in the sector Islamic banks still need tools to help them manage their funds and ensure profitability. The two sharia lenders Alizz Islamic Bank and Bank Nizwa announced increases in assets and earnings this year but recorded overall losses.
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