Oman will finally open the door to Islamic banking and let conventional lenders run Shariah-compliant operations in a bid to keep investment funds in the Gulf state and grab a share of the rapidly growing industry. A central bank official told Reuters on Tuesday applications were open for the creation of Oman's first standalone Islamic bank, after a decree from ruler Sultan Qaboos bin Said.
"His Majesty approved the establishment of an Islamic Bank and allowing the banks in the Sultanate to open new branches if they wish so," a circular posted on Oman News Agency said. Existing banks in the Gulf state will not be allowed to switch to become Islamic banks, the official added.
Oman is the only Gulf Arab state which until now has not set up a bank specifically offering products and services complying with Islamic law. Its central bank head said in 2007 that Oman believed that "banks should be universal". The move aims to tap into demand for Shariah-compliant products and services currently being met elsewhere in the Gulf, analysts said.
"This decision should help in curtailing to a certain extent the outflow of Shariah-compliant investments from Oman," said Joice Mathew, head of research at United Securities in Muscat. While neighbouring Gulf states have ramped up Islamic finance services in recent years, Oman stood out by refusing to participate in the industry now estimated to be $1 trillion in size and growing at 15-20 percent a year, according to PricewaterhouseCoopers estimates.
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