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OMAN: Six years since
the introduction of Islamic banking in Oman, the latest adopter of Shariah
finance in the GCC has managed to quadruple its Islamic banking deposit
base and grow its assets to OMR1.8 billion (US$4.66 billion), commanding
6.3% of the total banking market share. These developments are, as market
pundits say, a clear demonstration of strong demand and positive growth
momentum for Shariah compliant financial products in line with industry
expectations of a double-digit market share for Islamic banking entities in
the next few years.
Adopting the best practices of older industry players – an advantage gained
by the Sultanate due to its late entry to the Islamic banking and finance
scene – Oman was able to implement effective strategies to spread awareness
and spur demand while its Islamic banking community continuously engineer
suitable products to meet the needs of its customer base. This is evident
in the performance of Islamic banking entities during the first six months
of the year which saw the two fully-fledged Shariah banks and six Islamic
windows double their extension of credit to OMR1.4 billion (US$3.62
billion) from OMR700 million (US$1.81 billion) a year ago and attracted
OMR1.2 billion (US$3.1 billion) in deposits from customers – a surge from
OMR300 million (US$776.06 million) outstanding as at the end of June 2014.
Central bank data shows that the growth rate experienced by Islamic banks
outstrips their conventional peers, although it must be noted that the
figures for Shariah entities stem from a lower base. In the first half of
2015, conventional commercial banks realized an 8.9% expansion in credit
disbursement to OMR17.8 billion (US$46.05 billion) while total assets were
up 11.2% to OMR27.4 billion (US$70.88 billion).
These positive six-month data comes at a time of significant stress to the
Sultanate’s macroeconomic indicators due to headwinds at a domestic and
global level. In the first quarter, Oman’s GDP at current prices sank 14.2%
against an appreciation of 2.7% the corresponding period in 2014 while the
annual inflation rate measured by movement in the average CPI for the
Sultanate hovered at 0.24% in the January-June 2015 period. Rated ‘A1’ by
Moody’s, the investment grade rating, however, is pinned with a negative
outlook premised upon uncertainty involving the effectiveness of government
measures with regards to a multi-year period of soft oil prices. In the
first three months of the year, the petroleum sector plunged 36.8% while
the non-petroleum sector was up 4.1%. Nonetheless, Moody’s in its rating
reaffirmation earlier this year believes that Oman’s intrinsic economic and
fiscal strengths buoyed by solid government asset buffers would not be
signi ficantly undermined over 2015/16 in its base case oil price scenario.
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