CMA Oman's sukuk regulation aims to provide transparency

KUALA LUMPUR: Capital Market Authority of Oman (CMA Oman) recently issued new sukuk regulations that aim to provide clarity and transparency to market players, while providing protection to investors in sukuk transactions. 

At the forefront of the historical initiative is Kemal Rizadi Arbi, a Malaysian who is an adviser at CMA Oman as well as a member of the Oman government’s sukuk committee.

“It is to be noted that not all jurisdictions have specific and separate sukuk regulations, particularly in the Gulf Cooperation Council (GCC) countries, with many just having a conventional bond regulatory framework with some additions made on the syariah requirements. 

“In addition, it has been drafted to provide flexibilities and spur innovation in the market, among others introducing a new trust regulation and structure and allowing the issuance of a sukuk programme,” said Kemal in an email to Business Times recently. 

He said the issuance of the new sukuk regulation formed an integral part of the overall strategy of the Oman CMA to enable the capital market to play a vital role as a fund-raising platform for companies in the economic development of Oman, particularly in the fixed income market, where sukuk forms an important element to further develop Oman’s Islamic capital market.

“This new sukuk regulation will form a key milestone in the evolution of the sukuk market in Oman and hopefully boost sukuk issuances, particularly from private sector players in order to meet their development and funding needs, while diversifying the financing base and risk away from the traditional banking sector,” he said.

 Kemal said sukuk issuances would also provide an essential liquidity management instrument and investment avenue for both Islamic and conventional financial institutions, investment funds and takaful/insurance operators in Oman.

“Hence, it will not only provide a wider investor base for both conventional and syariah-compliant investors, but also attract the required foreign investments into the country via foreign investors. 

“We are confident that this new regulation will have a positive impact on Oman’s capital market and the economy,”

 he said. Kemal said within three years since the issuance of the Islamic Banking Regulatory Framework in December 2012 and the establishment of two Islamic banks and six Islamic windows, the Islamic financial market in Oman has seen the launch of the new Muscat Securities Market (MSM) Syariah Index with 30 syariah-compliant listed companies.

esides that, Oman has also seen the launch of three syariah-compliant investment funds, the first Oman sovereign sukuk and also the first corporate sukuk, and the establishment of two takaful operators, including the issuance of the new takaful law. 

“This is another important milestone and will lay the foundation to boost the development of the sukuk market and Islamic finance in Oman,”

he said. According to recent media reports, several Omani companies — including financial institutions, property developers and oil firms, are exploring the feasibility of floating sukuk issues, with the new regulation on syariah compliant bond instrument in place.

The Times of Oman said this was in line with global trends where GCC states, along with Malaysia, Indonesia, Turkey, Singapore, and Pakistan,

have issued US$11.1 billion (RM43 billion) worth of sukuk in the first three months of this year. 

“These countries are choosing to issue more of their debt as sukuk rather than conventional bonds. “These countries issued 39.3 percent of their debt as sukuk — the highest ratio of sukuk to conventional debt in eight years, based on data from Fitch Ratings,” it said.

(News Strait Times Online / 03 May 2016)

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Private firms in Oman gearing up to float Sukuk issues

Muscat: Several Omani companies, including financial institutions, property developers and oil firms, are exploring the feasibility of floating Sukuk issues, with the new regulation on Sharia-compliant bond instrument in place.

This is in line with global trends where GCC states along with Malaysia, Indonesia, Turkey, Singapore and Pakistan, have issued $11.1 billion worth of Sukuk in the first three months of 2016. These states are choosing to issue more of their debt as Sukuk rather than conventional bonds. These countries issued 39.3 percent of their debt as Sukuk - the highest ratio of Sukuk to conventional debt in eight years, based on data from Fitch Ratings.

“We have had increased consultations with companies wanting to issue Sukuk. Some of them had wanted to wait until the regulation was out before proceeding,” Kemal Rizadi Arbi, Advisor at the Capital Market Authority, told the Times of Oman. These companies are planning to float Sukuk issues to raise funds from the market.

Kemal said the new regulation allows for the issuance of a Sukuk programme, unlike in case of bond issuance. This means that with a base prospectus and upfront approval from the CMA, a company will be able to determine the timing, amount and pricing of the Sukuk to be issued, based on the company’s funding and operational needs, and not required to issue the whole Sukuk amount all at once and this, not incurring the whole cost upfront. In addition, the new regulation allows not just SAOG and SAOC companies, but also LLC firms with a good track record to raise funds by way of a Sukuk.

Elaborating on the advantages of Sukuk over bonds, he said companies may even get better pricing in terms of their funding cost, due to greater demand and a wider investor base of both conventional and Sharia-compliant investors globally, while attracting required foreign investments into the country. “In the existing bond framework, there are some restrictions. For example, you cannot raise bonds beyond the company’s capital.”

Also, Kemal said, the regulatory authority has introduced a trust structure in the new regulation in line with other international jurisdictions, making Oman one of the few GCC countries to have this. It allows a trustee to hold assets on behalf of the Sukuk holders. In addition, there will not be any restrictions on the Sharia structure of the Sukuk, subject to the respective Sharia Supervisory Board (SSB) approval of the issuer. The choice of the SSB is left to the issuer. The new regulation also allows the incorporation of an LLC as a Special Purpose Vehicle (SPV) and provides an optional rating requirement. All these have been drafted to provide flexibility and spur market players into innovation.

He said the issuance of the country’s first sovereign Sukuk and development bonds by the government will help build a yield curve for the country in order to create a pricing benchmark for issuers and to enhance secondary market activities. “Nevertheless, there needs to be continuous issuances with different maturities, not only by the government but also by government-related entities and financial institutions, to develop this market further.”

Sukuk forms an important element to further enhance Oman’s Islamic financial market and enable the capital market to play its vital role as a fundraising platform for companies, while diversifying the financing base and risk away from the traditional banking sector.

"The issuance of this new Sukuk regulation is another important milestone and will lay the foundation to spur further development of the Sukuk market and capital market for the economic development of Oman,” Kemal said.

(Times Of Oman / 24 April 2016)

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Islamic finance in Oman poised for solid growth: Bank Nizwa CEO

Muscat: Islamic financial institutions in the Sultanate are expected to achieve a healthy growth in the banking sector in the near future, said the chief executive officer of the Bank Nizwa.

“Within no time, Islamic finance will grow above 15-20 per cent of the total banking sector activities in Oman,” Dr Jamil El Jaroudi, chief executive officer of Bank Nizwa told the ‘Times of Oman’.

Stating that Bank Nizwa will open new branches in the Sultanate by the end of the year, he remarked that Oman will be the leader in the Islamic finance soon.

“People’s aspiration on Islamic banking is huge because it is an industry of transparency and fairness so it has no uncertainty,” he said on the sidelines of the launch of Bank Nizwa’s mobile branch.

Speaking about the bank’s growth, he said, “we were able to reach breakeven in December in the three years of time and we consider this as a great achievement because it is a new industry and the sort of operation is different from other conventional banks.”

“This achievement also put us in an important cruising level and we are able to reach the level that to continue as a very successful organisation,” he added.

“Through our new mobile branch, we can easily identify the market needs and demands for future branch location and services” he said. According to him, the ‘branch on wheels’ will take customer close to the bank. “Our mobile branch is part and package of our strategy to deliver greater convenience and accessibility to existing and potential customers,” he said.

“We are continuing our efforts to raise awareness on Islamic banking and bring it to the doorsteps of our growing customer base across the Sultanate,” he added.

Over the next few months, mobile branch will travel all-around the Sultanate offering a host of products, services and also make the people aware on the benefits of Islamic banking.

According to bank officials mobile branch will help customers to open new accounts, activate debit cards, receive account balances and mini statements, deposit cash and cheques.

“Our main idea in launching mobile branch is to be more mobile and offer our products and services to the people across the Sultanate,” Asad Batla, head of Consumer Banking said.

“Our teams of expert will also available in the truck and they offer financial consultations on how they can benefit from this growing industry in their day to day lives,” he added.

Truck’s journey will start from the governorate of Muscat, moving on to Dakhiliyah, Al Sharqiya, Dhofar, Al Batinah and Al Buraimi.

(Times Of Oman / 19 April 2016)

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Al Madina Takaful named ‘Oman Insurer of the Year’

Muscat - 

Al Madina Takaful was named ‘Oman Insurer of the Year’ at the MENAIR Insurance Awards 2016 held on January 27 in Dubai.

The company was named a finalist in three categories and won the ‘Oman Insurer of the Year’ award beating competition across both takaful and conventional insurance segments in Oman, a press release said on Tuesday.

Al Madina was the only insurance company from Oman to be recognised at this year’s awards, which are judged by an independent panel of experts and recognise excellence of companies and people in the industry.

The awards are judged by an independent panel of experts and recognise excellence of companies and people in the industry.

Speaking at the awards ceremony, Gautam Datta, CEO of Al Madina Insurance Co, said, “Wining the ‘Oman Insurer of the Year’ award is remarkable, as this the first time we are being recognised in the larger insurance industry, beyond the takaful segment we operate in. This is a milestone achievement for the organisation beating both local and regional players operating in Oman, and comes at a time when the industry is facing tough challenges. It’s a great reward for the hard work and commitment of our team, business partners and clients. A huge thank you to all.”

Speaking on the success, Usama al Barwani, deputy CEO of Al Madina Insurance Co, said, “It give us immense pride to be chosen as ‘Oman Insurer of the Year’. This is a coveted platform, and we are excited to be chosen to represent the industry in this stature. It inspires us further to meet and exceed customer expectations and excel in the way we do business.”

(MuscatDaily.Com / 02 Febuary 2016)

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Call to dispel Islamic banking misconceptions in Oman

Muscat: There are some misconceptions about Islamic banking in Oman, which need to be dispelled through raising awareness about this sector, says a senior official at Bank Nizwa.

“Perhaps many market participants believe that Islamic banking is just a way to ‘Islamise’ interest and they keep comparing Islamic banks to conventional banks,” Dr Jamil El Jaroudi, chief executive officer of Bank Nizwa, told ‘Times of Oman’ in an exclusive interview.

“At Bank Nizwa, it is not only our belief, but also our commitment to build Islamic banking true to its core based on Sharia,” said the official at Oman's first dedicated Islamic bank.

El Jaroudi noted that they do not want to simply replicate what is out there in the conventional banking and continuously try to innovate and build an industry based on Sharia objectives, and not necessarily just to be Sharia-compliant.

“However, during the initial phase, we do have to provide alternatives to the current conventional products to suit the demand of customers. This process will take time. In the meantime, we can help to re-design the basic concept of finance based on Sharia, which is more equitable to all rather than only based on debt,” he said.

‘Social philanthropic’

“Another misconception is that Islamic banking is similar to a social philanthropic entity. Accordingly, why do Islamic banks ask for profit margins and fees and this is why knowledge about this industry is imperative to succeed,” the official added.

“Yes, there are ethical and social obligations but above all, Islamic banks are commercial and profit oriented businesses owned by investors who chose to put their wealth at work in a Sharia-compliant manner,” El Jaroudi explained.

Asked what Islamic banking provides should do to help enhance the performance of this sector, the CEO of Bank Nizwa said that they need to grow to a certain size to be able to compete on equal footings, meaning good services and good returns to both clients and investors.

Protection

“Islamic banks need to be protected, may be incentivised as well, until it gets there because the ultimate beneficiary is the economy of Oman,” he said.

In addition, El Jaroudi said that Oman can learn from the Islamic finance experience of its neighbouring countries as well as other countries in the Far East and other regions.

“Oman has the advantage of seeing and learning from the experiences of the other markets, be it good or bad. If you look at Oman’s Islamic banking regulations, it is very much influenced by this, in addition to choosing what Oman decides is right for its market,” he said.

“However, learning does not stop here. Now we need to dig more into the main benefits of Islamic finance to economies in general and be prepared to modify or add what benefits the Sultanate the most,” El Jaroudi stated.

(Times Of Oman / 20 September 2015)

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Oman’s Islamic banking could achieve 17% of total banking asset in 5 years, Bank Nizwa CEO

MUSCAT: Islamic banking in Oman could achieve around 15 to 17 per cent of the total banking asset within the next five years in normal market conditions with recovery and stability in the oil market, says a bank official.

Speaking to the Times of Oman, Dr Jamil El Jaroudi, chief executive officer of Bank Nizwa, said it is ‘difficult’ to estimate the share of Oman’s Islamic banking operations at this juncture due to the volatility in oil prices, which is affecting the country’s growth.

According to the Central Bank of Oman, the combined assets of Islamic banks and window operations surged ahead by 64.08 per cent to OMR1,832.6 million by end-June 2015, from OMR1,116.9 million for the same period last year, while conventional banks’ total assets moved up by 11.22 per cent to OMR27,391.9 million, over the same period of 2014.

“This is an important variable that would determine the nature of the competition for the banking sector going forward,” El Jaroudi noted.

However, assuming a normal market condition and recovery with some stability in the oil price, it is fair to assume that Islamic banking could achieve a level of around 15 to 17 per cent of the total banking asset within the next five years, he added.

“This level would be similar to the other markets in the region including the United Arab Emirates (UAE) and Bahrain,” said the CEO of Bank Nizwa.

Remarkable growth

Commenting on the performance of Islamic banking in Oman, El Jaroudi said, “If you look at the industry reports, both fully-fledged Islamic banks in Oman and Islamic windows combined saw an average growth rate of over 40 per cent year-on-year, in terms of total assets.”

The average growth for conventional banks on the other hand was around nine per cent for the same period, he added.

“In terms of financing portfolio growth, it is even more remarkable, as we have grown by more than 300 per cent on an average during the same period, compared to the conventional banks’ average of approximately 15 per cent,” the official noted.

Other countries

He added that these figures are in line with the other countries in the region which are experiencing the same challenges in growing their Islamic banking industries.

“For example, the five-year compound annual growth rate (CAGR) in Qatar was 31 per cent which is 1.8 times faster than its conventional banking with $54 billion worth of Islamic assets representing 24 per cent market share,” he said.

In the UAE, it is lower at 14 per cent but still three times faster than its conventional banking sector with $83 billion worth of Islamic assets representing 17 per cent market share, El Jaroudi explained.

He added that in some other countries, the Islamic banking sector has experienced more challenges that curtailed its growth altogether, although it could be due to geo-politics or that Muslims are not the majority in those markets.

“So we have to look at the growth of this growing sector in Oman and appreciate its achievements thus far,” the CEO of Bank Nizwa concluded.

(Times Of Oman / 30 August 2015)

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Islamic banks’ finances surge 107 per cent in Oman

MUSCAT: Oman’s Islamic banks and window operations have shown a robust growth of 107 per cent in financing at OMR1,265.8 million for the first four months of 2015, from merely OMR611.1 million in the same period last year.

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.

Further, two Islamic banks and window operations of conventional banks have launched innovative products to attract Omani customers, besides opening several branches in different parts of the country.

Total customer deposits held by Islamic institutions also shot up by 194.5 per cent to OMR847.3 million by the end of April 2015, from OMR287.7 million for the same period last year, according to the latest monthly bulletin released by the Central Bank of Oman.

There has 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.

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 OMR1,371 million at the end of December 2014, an increase of 68.2 per cent over the previous year.

Islamic banking entities provided financing of OMR1,049.5 million as of the end of 2014, compared to OMR434.3 million one year earlier. Together, Islamic banks and windows brought down their combined net losses to OMROMR4.4 million last year, from a net loss of OMR13.86 million in the previous year.

(Times Of Oman / 05 July 2015)

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OAB’s Islamic banking arm gets nod for new products

MUSCAT: New products and services that Al Yusr, the Islamic banking arm of Oman Arab Bank (OAB), will launch have been reviewed and approved at the seventh Sharia Supervisory Board (SSB) meeting held recently.

One such key product deliberated at the Sharia board meeting was ‘Al Yusr Running Musharakah product’, a Sharia-compliant solution to cater to business requirements of regular operating and overhead expenses and to fulfil the cash-flow demand of the customers.

As part of the commitment to contribute to the growth of the Islamic banking industry in the Oman, Al Yusr always comes up with innovative and value-added products and services that are being developed, keeping in mind the unique individual and business needs of the people in the Sultanate, said the bank.

In order to ensure full compliance with Sharia, the Sharia Supervisory Board reviewed the ‘Post product implementation’ of Al Yusr products and services to ensure that they are in line with the Sharia rules and principles. The Sharia Board also reviewed and approved the Sharia audit plan for 2015.

The meeting was held at the bank’s corporate office presided over by Dr Essam Al Enezi, head of the Al Yusr Sharia Supervisory Board, and attended by Abdul Qader Shir Al Bulushi, general manager, Al Yusr and other senior officers.

Abdul Qader Shir Al Bulushi, while appreciating the Sharia Supervisory Board members, said that such regular meetings with the Sharia Board scholars who have vast knowledge of Islamic banking and finance, is pivotal in expanding the Islamic banking concepts and knowledge among the management, staff and clients.

Overall, it will create awareness among the public in the Sultanate, he added.

In the past, the Al Yusr Sharia Supervisory Board members have conducted several presentations and seminars on Islamic banking and finance in Muscat and Salalah.

(Times Of Oman / 23 June 2015)

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TAKAFUL OMAN LAUNCHES UNIQUE MOBILE APP

Takaful Oman Insurance Company, a full-fledged Islamic insurance provider in the sultanate has launched a comprehensive smart app called Takaful Oman for insurance users across Oman. 

The mobile app brings convenience to all, whether you have an insurance from Takaful Oman or not. Anyone with the app can access information about the nearest hospitals, use the contact and book appointments, and also find the nearest vehicle repair workshops.

The app has an inbuilt database of hundreds of such repair workshops and hospitals spread across Oman. In an attempt to create an app that is beneficial for everyone in Oman, the Takaful Oman smart app is a bold and innovative step into the future.

Speaking on the occasion, Suhai said, “The app will be very useful, and benefit the community. It is wonderful to see the progress being made in the Islamic insurance sector and these innovations sets new benchmarks in the industry.”

Salhi  said, “A unique and helpful initiative, this mobile app will help people at a time of need. We look forward to many such innovations that stand to benefit all individuals with such services in the Takaful sector.”

O G Ravishankar, CFO & general manager of Takaful Oman Insurance said, “The Takaful Oman smart app is a very unique app that intends to serve the Omani community at large. Right from the outset we were clear as a company that we would be very community-oriented and the app is in line with this goal.”

He added, “Even if you are not a Takaful Oman customer, you can download the app and use its various features. The app is particularly helpful in times of emergencies when it can actually direct you to the nearest hospital or vehicle repair workshop.

“Instead of focusing on a business-like app, we tried to focus on the best way in which this innovative application can benefit everyone in Oman. The app will have all the relevant information about Takaful products and in the near future we have plans to add features that will help users purchase the insurance they require, right from the app.

“Takaful Oman smart app is currently available in Arabic and English and can be downloaded from the Android Play Store as well as the iOS App Store.

(Muscat Daily.Com / 15 June 2015)

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Oman announces OMR200 million debut sovereign sukuk issue

Muscat: Oman government on Sunday officially announced the much-awaited maiden sovereign Sukuk issue of OMR200 million. 

The sovereign Sukuk issue will be through a private placement and will open for subscription soon.   

"The sovereign Sukuk issue will be through a private placement process and marketed primarily to Islamic financial institutions, and sophisticated investors with a minimum subscription amount of OMR500,000," said Tahir Salim Al Amry, who heads the Sukuk committee 

"We have secured the in-principle approval from the CMA and are in advance stages of the structuring and documentation of the transaction," added Tahir, who is also the director general of Budget & Contracts at the Ministry of Finance. 

The Government sees the debut sovereign Sukuk issue as a benchmark transaction that will form a key milestone in the evolution of the Sukuk market in Oman, while providing an essential domestic liquidity management instrument for Omani Islamic financial institutions and an alternative to conventional financial institutions. 

Elaborating on the objectives of the Government's first sovereign Sukuk, Tahir Salim Al Amry said, "The sovereign Sukuk is primarily aimed at addressing the need of the nascent but fast growing Islamic financial sector in Oman. The Sukuk will serve as a domestic investment and liquidity management instrument to Islamic financial institutions in the country." 

Creating a benchmark

"In addition, the issuance of the debut sovereign Sukuk will support the Government in fulfilling its development targets and creating a benchmark for capital market transactions in Oman in general and Sukuk in particular."

"This is important for Islamic banks as it will help them to manage their liquity," Abdullah Al Salmi, executive president of the Capital Market Authority, told Times of Oman. 

"The CMA considered the plans proposed by the Ministry of Finance, and provided an in-principle approval for the debut sovereign Sukuk issuance. We are confident that this will have a positive impact on Oman's capital market by serving as a benchmark for future Sukuk issuances," added Al Salmi. 

The face value of the Sukuk issue will be OMR1 and the investor community can buy the Islamic instrument once it is listed on the Muscat Securities Market, Al Salmi told Times of Oman.

Speaking on the role of the CMA, Al Salmi added, "This issuance forms an integral part of the overall strategy of the CMA to enable the capital market to play its vital role in the economic development of Oman, particularly in the fixed-income market, where Sukuk forms an important element, to further develop Oman's Islamic capital market." 

"The transaction will also enhance the depth and breadth of the overall capital market in Oman. In a short span of two years since the issuance of the IBRF, besides the establishment of Islamic banks and windows, the Islamic capital market has seen the launch of the new MSM Sharia Index, three Shariah compliant investment funds, the first corporate Sukuk, and two Takaful operators."  

Bank Muscat Investment Banking along with the bank's Sharia-compliant banking window Meethaq, and Standard Chartered Bank have been appointed to advise the Government on the transaction. 

The committee comprises a select team of professionals from the MoF, the Central Bank of Oman (CBO) and the Capital Market Authority (CMA). The committee is also being assisted by the MoF Coordination Team.Islamic banking in Oman has made notable progress and now represents approximately 5 per cent of the total banking sector in Oman. Since the enactment of the Islamic Banking Regulatory Framework (IBRF) by the CBO in December 2012, through Royal Decree No. 69/2012, the Islamic banking sector has grown to comprise two full-fledged Islamic banks and six Islamic windows of conventional banks, offering banking products and services in accordance with the principles of Shariah.

(Times Of Oman / 10 May 2015)

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Oman's Al Yusr Islamic Banking meeting focuses on new policy, products

Muscat: Al Yusr Islamic Banking from Oman Arab Bank (OAB), recently held its first Supervisory Board meeting of the year.

The meeting held at the Corporate Office of Al Yusr in Al Ghubra, was attended by Dr Essam AlEnezi; Chairman of the Al Yusr Shari'a Supervisory Board and Dr AbdulAziz AlQasaar; member of the Board and other senior managers of Al Yusr.

The Sharia Supervisory Board approved several Al Yusr retail and corporate banking products and policy which are carefully developed keeping in mind the unique individual and business needs of the customers in Oman.

One of the key product approved during the Shari'a Board meeting is the Al Yusr Ladies Saving Account, giving special privileges and benefits to the account holders.

Abdul Qader Shir Al Bulushi; General Manager Al Yusr Islamic Banking mentioned that the first Shari'a Supervisory Board's meeting for 2015 recently held, was successful and the approval of new products will play a pivotal role in introducing innovative and value added products and services to meet the unique needs of Al Yusr customers. 

In the meeting, Dr AlEnezi also welcomed AlYusr new Internal Sharia Reviewer, Dr Muhammad Iman Sastra Mihajat, a Sharia expert from Indonesia. Dr Muhammad Iman will ensure that the products and services offered by Al Yusr are in accordance to the Sharia principles. 

He will also focus on training Al Yusr staff to enhance the understanding of its staff about Islamic banking practices.

Al Yusr will continue to facilitate more in-depth trainings to ensure that each employee can grow within Al Yusr, is motivated to perform at his or her best for the benefit of the organisation and customers. These training sessions demonstrate commitment of Al Yusr to develop the human capital.

(Times Of Oman / 21 April 2015)

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Oman: Bank Nizwa chief executive highlights Islamic banking potential

Bank Nizwa participated in the College of Banking and Financial Studies (CBFS) Symposium, discussing the emerging challenges and future growth of the Islamic banking industry in the Sultanate.

In addition to sitting on a panel discussion on the 'Prospects and Challenges Facing Islamic Banking in Oman', the CEO of Bank Nizwa, Dr Jamil El Jaroudi, delivered the sole presentation of the symposium shedding light on the journey of Islamic banking to date in Oman, its current status and future projections. 

Addressing government policy makers, research scholars, industry professionals and students, El Jaroudi said, "Islamic banking saw  33 per cent and 27 per cent in financing and deposits respectively in 2014 incremental increase of the entire banking sector."

"In order to maintain this momentum, we need to focus on overcoming both internal and industry challenges, including constraints in liquidity management, the lack of standardisation in products and services, the availability of qualified professionals, as well as the limitations posed by the relatively low levels of customer awareness on Islamic banking and the added-value it brings to individuals, local communities and the national economy," he added.

Explaining the banking landscape in Oman, El Jaroudi highlighted the competitive edge that conventional banks enjoy in comparison to Islamic banks, given their well-established networks, brand visibility and operational scales of efficiency.

He further outlined how these propositions support the operations and growth of Islamic windows as they leverage on the existing customer base and infrastructure of their parent organisation; while fully-fledged Islamic banks require time to build their network and promote their products, services and name. 

As of December 2014, the market in Oman includes two full-fledged Islamic banks and six Islamic windows of conventional banks, with a network of 46 branches in total. In light of the recent formation of the High Sharia Supervisory Authority, Dr El Jaroudi highlighted four key areas to consider in order to inspire organic growth within the industry, including products, people, market place and the regulatory environment. 

According to El Jaroudi, the first area focuses on the introduction of products that can compete with their conventional counterparts, such as equity financing, liquidity management and Sukuk. As for people, this area is centred on attracting qualified and experienced professionals and retaining them.

He characterised the market place, as a catalyst for attracting investors to utilise Islamic banking products and services to sustainably grow their businesses. As for the regulatory environment, it emphasises the need to have common ground between Sharia and civil regulations in order to achieve the industry's long-term goals.

Joining Dr El Jaroudi in representing Bank Nizwa during the symposium was Dr Ashraf Al Nabhani, General Manager Corporate Support, who took part in a panel discussion entitled 'Impact of Islamic Finance on Economic Growth'.

The panel also featured Prof. Abbas Mirakhor, a distinguished scholar who is the First Holder of the International Centre for Education in Islamic Finance (INCEIF) Chair of Islamic Finance.

Based in Malaysia, INCEIF is the only university globally dedicated to offering academic and professional qualifications in Islamic finance.

Bank Nizwa's participation in the symposium came as part of its ongoing strategy to continue raising awareness on Islamic banking across the Sultanate. The Bank has been collaborating with CBFS, supporting its program in Islamic banking through workshops for first year students, introducing them to the industry, its impact on the economy and most importantly highlighting available career opportunities.

(Times Of Oman / 13 April 2015)

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Omantel to seek shareholders’ approval for OMR50m-sukuk issue

Muscat: Majority state-owned Oman Telecommunications Company (Omantel) is seeking an approval from shareholders for a planned OMR50 million Islamic debt instrument or sukuk issue.

EGM on March 22

The company plans to seek approval for the sukuk issue at an extra ordinary general meeting (EGM) scheduled to be held on March 22.  The telecommunication firm is working with its bankers to structure the sukuk, which include tenure of the issue. 

A large number of local investors are interested in investing money in sukuk instrument. 

A vibrant sukuk market in Oman will help Islamic banks to invest their excess funds in an effective manner. Both capital market debt instruments like sukuk and Islamic banks should grow side by side. 

Traditionally, sukuk issues have a maturity of five years as investors look for long term tenure issues.

A special purpose vehicle (SPV) is also needed for raising funds by way of sukuk issue, which is asset backed.  In Oman, Al Madina Financial and Investment Services was the first company to come out with a sukuk issue, which was for funding Muscat Grand Mall expansion (developed by Tilal Development Company).   

Bank Muscat is another institution, which is planning a sukuk issue now. Also, Oman government has been talking about issuing a sovereign sukuk of OMR200 million this year for meeting budget deficit.

(Times Of Oman / 08 March 2015)

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Islamic financing aiding robust growth in Oman's banking sector

Muscat: Oman is a prime location for the Islamic finance sector to thrive and statistics show that it will do so, was the main conclusion of the Accounting for Islamic Finance event held by ACCA Oman's members' advisory committee (the Association of Chartered Certified Accountants).

Sponsored and held at Bank Muscat Meethaq, Sulaiman Al Harthy, Group General Manager of Islamic Banking at Bank Muscat and Khalid Yousaf, Director of Islamic Finance Advisory Services at KPMG Oman spoke at the event.

Sulaiman Al Harthy said: "Meethaq is proud to host the ACCA member event Accounting for Islamic finance as part of initiatives reflecting the bank's focus on maintaining the leadership role in Islamic banking and finance. Islamic banking in the Sultanate is contributing to the growth and development of the banking sector in Oman and Meethaq is committed to sustaining its contribution to Oman's economy in light of the emerging trends."

"With strong economic growth projections, significant government expenditure on infrastructure projects and a young, Shari'a-sensitive population, Oman has all the ingredients required for a successful Islamic finance sector. Apart from Islamic liquidity management, the challenge is in tackling long-term funding requirements," he added.

Islamic banking assets

"Islamic banking assets in Oman stood at $2.8 billion in June 2014, or 4.4 per cent of total banking assets, since the launch of Islamic finance less than two years ago in January 2013. This growth is expected to continue and Islamic banking assets are projected to grow to between $5 billion to $7 billion by 2018. The growth is driven by a combination of the enabling environment fostered by regulators and a young, Shari'a-sensitive population."

"Meethaq has adopted the best practices in Islamic banking and finance worldwide to combine a robust model which protects customers and complements the Islamic banking industry. In just over two years of operations, Meethaq has attained a leading position in the Islamic banking industry in Oman with over 50 per cent of financing receivables."

Growing public awareness

KPMG director Khalid Yousaf said: "Growth of Islamic Finance in Oman has been slow but steady. 2015 is likely to see all Islamic Banks and Windows break-even and turn profitable, merely within two years of start-up operations. Growing public awareness will feed further growth in the coming years.

"Though still small compared to conventional finance, Islamic Finance has created its niche space globally. Its transactions being largely participation-based, appeal not only to faith-based investors but also to conservative risk-takers shunning high levels of leveraging."  

Maqbool Al Lawati, chair of ACCA's members' advisory committee in Oman, said: "The event highlighted products available in Oman for Islamic banking and how successful the sector has been in the past few years. 

"More than 60 ACCA members and key employers attended the event which I think proves just how interesting and important this topic is," he added.

(Times Of Oman / 21 February 2015)

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‘Islamic banks showing remarkable growth in Oman’

Islamic banks and windows have reported a remarkable growth at the end of August 2014, when compared to the results of the same period last year, said a top official at Central Bank of Oman (CBO).

"In 2014, the total assets stood at OMR1billion. In 2013, it was 196 million. The market share for Islamic banks and windows now amount to 5 per cent of the banking sector," said Ali Al Raisi, the deputy CEO of CBO.

Islamic banking, which has become increasingly important since 2011 when the CBO announced its decision to license Islamic banking services with the objective of diversifying and widening banking services, now has 10 per cent of the total branch network in the Sultanate. Oman introduced Islamic finance at the end of 2012, becoming the last country in the six-nation Gulf Cooperation Council to do so. Since then, two full-fledged Islamic banks and six Islamic windows at conventional banks have opened their doors. Under a base scenario, the study estimates Oman's Islamic banking operations could reach OMR5billion in assets by 2018, a 7 per cent share of estimated total banking assets at that time.

According to a Thomson Reuter's recent study, Oman's Islamic banking operations could reach OMR5 billion of assets by 2018, a 7 per cent share of estimated total banking assets at that time.

A best-case scenario puts the figure at OMR7.1 billion, a 10 per cent share.

Recently, ratings agency Standard & Poor's said that Islamic banks are set to boost their market share in the Gulf countries to nearly 30 per cent in the next five years.

"We think the market share of Islamic banks in the overall banking system assets in the Gulf Cooperation Council (GCC) countries could gradually inch closer to 30 per cent over the next five to six years, from just under 25 per cent currently," said Timucin Engin, a credit analyst with Standard & Poor's. S&P said it expected total GCC banking assets, both conventional and Islamic, to rise to $2 trillion by the end of 2015, from $1.7 trillion at year-end 2013.

However, solid market positions by conventional banks in the region will prevent the fast-growing Islamic banks from attaining a bigger share, said Engin. The GCC region groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. It has one of the world's largest Islamic banking markets and S&P said government support should help the sector to keep expanding its market share.

The agency said it expected Islamic banks would continue to grow faster than their conventional peers in the next couple of years, particularly in Qatar and Saudi Arabia, where domestic credit is projected to grow the most.

(Times Of Oman / 10 November 2014)

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Oman Sets Up Central Sharia Board To Boost Islamic Finance

Oman’s central bank has set up a sharia supervisory board to help oversee the sultanate’s Islamic banking industry, a centralised model that is increasingly being adopted across the global industry but remains a rarity in the Gulf.

Sharia boards are groups of scholars who rule on whether financial instruments and activities follow religious principles, such as bans on interest payments and pure monetary speculation.

Oman was the last nation in the six-member Gulf Cooperation Council to introduce Islamic finance, publishing rules for it in 2012. The introduction of a central sharia board could now speed up product development, limit costs for Islamic banks and facilitate issues of sukuk (Islamic bonds).

The central bank appointed five members to its sharia board, which will have direct oversight of Islamic banking institutions, similar to the approach taken by regulators in Malaysia, Pakistan, Morocco and Nigeria. The five members were chosen from seven nominated candidates, the central bank said without naming them.

By contrast, most Gulf countries practice self-regulation of Islamic financial institutions, leaving sharia boards in each commercial bank to determine which products are permissible. Bahrain’s central bank has a sharia board that vets its own products.

The United Arab Emirates has said it plans to follow the centralised approach, backing this up with specific legislation, which could help reduce the risk of conflicting rulings from the sharia boards of various Islamic banks. It has not given a timetable for the legislation.

In Oman, two full-fledged Islamic banks have been established, Bank Nizwa and al izz Islamic, as well as several Islamic windows operated by conventional banks.

Sukuk issues are being considered by the government and banks but progress has been slow, with only real estate developer Tilal Development Co making a small sukuk issue last November.

Oman’s finance minstry plans to issue OMR200 million ($519.5 million) worth of sovereign sukuk early next year, the government’s first such issuance, the chief executive of Bank Nizwa told Reuters last month.

The Islamic unit of Bank Muscat, Oman’s largest lender, plans a dual-currency sukuk deal worth around $300 million as part of a OMR500 million sukuk programme which the bank’s shareholders approved in March.

(Gulf Business / 09 October 2014)

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Islamic Investment Malaysia: www.islamic-invest-malaysia.com