Global Islamic banking assets are estimated to be above $1 trillion in 2010 and are expected to grow at the rate of around 20 per cent –
By Hasan Kamoonpuri –
MUSCAT — The Central Bank of Oman (CBO) will establish a national authority for monitoring Islamic finance and banking sector, Hamood bin Sangour al Zadjali, CBO Executive President, said here yesterday.
This authority (National Shariah Board) will be responsible for regulating Islamic finance and banking institutions, he told the Observer, after his speech at a workshop on “Islamic Finance and Banking,” organised by Horwath Mak Ghazali LLC.
Al Zadjali said the CBO has issued some directives for this sector and work on a complete legal framework of rules and regulations is currently under way.
According to these directives, all Islamic finance and banking organisations will be required to set up Shariah Boards to ensure that their products and services are in accordance with the principles enshrined in the Holy Quran.
In response to a query, the CBO chief said all Islamic banks will be required to invest their deposits in Oman only.
The CBO has so far granted licences to Bank Nizwa and Al Izz International Bank to operate as fully Shariah-compliant institutions. These local banks will be up and running by early 2012 in partnership with their foreign partners, he added.
Until May this year, Oman was the only GCC country where Islamic finance did not exist. Following the Royal Decree issued by His Majesty Sultan Qaboos in May this year to establish an Islamic financial services sector, almost every bank in Oman is considering launching an Islamic window in addition to the two full-fledged Islamic banks being launched. They are keen to tap the unfulfilled demand for Islamic banking.
Oman, say experts, holds out an Islamic finance and banking market of not less than $8 billion.The CBO chief said “global Shariah-compliant assets are estimated to have crossed $1 trillion in 2010 and are expected to grow at the rate of around 20 per cent. More than 600 Islamic financial institutions now operate in more than 75 countries. He stressed the need for a robust Shariah governance (Islamic laws outlined in the Holy Quran) framework as a foundation to achieve the objectives. In his keynote speech, Dr Omar Mustafa al Sharif, a renowned international trainer and expert on Islamic finance, said Islamic banking is growing the world over because there is a huge demand for it from people of all faiths and beliefs.
Among the many attractive features of the interest-free Islamic banking is that it does not involve buying and selling of debt, rules out speculative activities and is based on ethical investments.This in turn helps higher rate of return, lower risk exposure, and better risk management compared to conventional banking.
Interest and speculation-free Islamic financial model is attracting everyone’s attention not only for the huge business prospects but also for the solid stability that it provides.The two-day workshop (September 20-21) is aimed at making awareness on Islamic banking and its way of operating.
In his speech, Davis Kallukaran, Managing Partner, Horwath Mak Ghazali, said Islamic banking has gained broader acceptance in major international financial markets and there are ongoing research and studies on its merit as a viable alternative financial system in the world.
While Islamic banking has tremendous potential for Oman, the level of success will depend on the industry’s investment in research and in developing the talent pool. At stake is the credibility of the system.
Customers would want to see progress towards a holistic alternate financial system, even if it has to be step by step process.