Oman’s Islamic banking assets cross RO6 billion mark

Muscat – Islamic banking continues to grow rapidly in Oman thanks to growing awareness of Sharia-compliant products, strong retail demand and supportive regulations.

Total assets of Islamic banks and branches in the sultanate rose 10.7 percent year-on-year to RO6 billion in the first quarter of 2022, according to data from the Central Bank of Oman released on Sunday.

In terms of market share, Oman’s Islamic banking assets now account for 15.4% of total banking sector assets at the end of March 2022, according to central bank data.

Islamic banking assets in Oman have seen strong average annual growth of 30% between 2013 and 2021, compared to average annual growth of around 5% for conventional banking assets, according to Moody’s.

“Islamic banking continues to grow rapidly in Oman. Islamic banking asset growth accelerated in 2021, fueled by economic growth and rising oil prices. Islamic banking assets grew by 14% in 2021 compared to 6% in 2020, well above conventional banking asset growth rates (7% in 2021 and 1% in 2020),’ Moody’s said in a report.

The slowdown in growth in 2020 was caused by the COVID-19 pandemic, combined with a sharp drop in oil prices that year.

“Growth in the Islamic segment is now being driven, not only by injections of capital from shareholders, as it was originally, but also by inflows of customer deposits,” Moody’s said.

CBO data showed that Islamic banking entities in Oman provided financing worth RO4.9 billion at the end of March 2022, registering a growth of 9.6% compared to it. a year ago.

Total deposits held with Islamic banks and ATMs increased by 11.7% to RO4.5 billion at the end of March this year compared to a year ago.

The Islamic banking segment in Oman consists of two fully fledged Islamic banks – Bank Nizwa and Alizz Islamic Bank – and five Islamic banking windows in conventional banks, all established in 2012 and 2013.

“Conventional banks are leveraging their existing franchise, expertise and infrastructure to run their Islamic counters, which is driving the rapid growth of the Islamic banking industry,” Moody’s noted.

“The regulations in the country are favorable. A pipeline of new Islamic financial regulations will likely broaden the market in coming years,” the rating agency added.

Moody’s further stated that consolidation has begun in Oman’s Islamic banking sector and that this could potentially increase the segment’s profitability by creating synergies, providing the combined entities with greater pricing power and better fundraising ability. deposits.

In its sector commentary, Fitch Ratings recently said that Islamic banking in Oman is likely to maintain its positive trajectory in the short to medium term despite a number of structural challenges.

Echoing views similar to those of Moody’s, Fitch Ratings said: “Growth will be driven by growing awareness, strong retail demand for Islamic products, supportive regulations and a strong push for banks’ Islamic windows. conventional”. Improving operating environment, expected positive real GDP growth, rising oil prices, easing of coronavirus restrictions and rising interest or profit rates will also support the growth of Islamic banks. and conventional.