Sep 08 2012
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Islamic Banking to appeal to non-Muslims too: expert
'Oman has potential to emerge as model for Islamic Finance'
"Islamic banking products and services are not targeted at Muslims only," Yousaf explains. "Islamic banking products and services offer all features of 'ethical' banking plus more. Whereas 'ethical' banking shuns alcohol, adult entertainment, gambling, environment pollution and weapons of mass destruction, Islamic banking goes a step further in shunning conventional 'riba-based' banking and financial services as well. Non-Muslims seeking ethical banking products are therefore attracted to Islamic banking products and services."
In Malaysia for instance, 35 per cent of end-users of Islamic banking products and services are non-Muslim ethnic Chinese seeking ethical products which meet their financial criteria, according to the expert. "Also, due to the nature of the sharia technique applied in housing, car or other loans, the terms and conditions may be more acceptable to non-Muslims seeking those peculiar terms," he noted.
Two full-fledged Islamic Banks, as well as a host of conventional banks with Islamic Windows, are preparing to offer sharia-compliant financial services for the first time in the Sultanate, tentatively before the end of this year. In addition to Bank Nizwa and Bank Al Izz, which will serve as dedicated Islamic banks, conventional banks that are gearing up to launch Islamic Window operations are: bank muscat, National Bank of Oman, BankDhofar, Bank Sohar, ahlibank, National Bank of Abu Dhabi and Oman Arab Bank.
Yousaf also foresees a prominent role for Sharia Supervisory Boards in providing clarity to customers on the sharia principles underlying a specific bank's products and services.
"Ordinary customers when buying a faith-based product would like to be satisfied that the Islamic product or service they're purchasing is truly in compliance with Sharia' edict and tenet and not 'riba-based' or 'haram' under Sharia' principles. Since most people do not feel comfortable making a decision by themselves, they're likely to consult others (including for example, the Imam of their local mosque). The Imam or someone with knowledge of Sharia is likely to be guided by the 'fatwas' (edicts) issued by the bank's Sharia' Supervisory Board. It is very important therefore, for Islamic banks and windows to make 'Fatwas' issued by their Sharia Supervisory Board available to their branch staff and also train the customer-facing staff to be able to answer questions or objections raised by doubting customers," Yousaf commented.
Besides looking at the Sharia-compliance aspect, the customers will also use their commercial sense to ensure that the Islamic products and services they are purchasing are priced competitively, as well as the features offered do not put them at a disadvantage relative to their conventional counterpart, he further explained.
According to the expert, sharia scholars do not permit use of any "haram" tactics in promoting Islamic banking products and services. "The usual ethical standards applicable to advertising and promotion apply to Islamic banks as well, eg, no false representation of facts, no uncertainty involved in the features of products and services offered. Further, any aspect of gambling, speculation or unnecessary risk-taking is forbidden for use in promotional material of Islamic banking products and services."
Importantly, the expert envisions "positive and bright" prospects for the long-term growth of Islamic banking in Oman. "In countries where Islamic Finance is supported by the government, its growth has been stronger and faster than in countries where Islamic Finance is only market or industry-driven. In the Sultanate of Oman, both the government support as well as market/industry demand exists. Islamic Finance may go through an initial gestation period during which the customers will get more educated and the institutions will mature in their offerings.
In fact, the share of Islamic banking assets could potentially overtake the conventional banking within 5-7 years, Yousaf predicts. "We may see more full-fledged Islamic banks opening, more foreign Islamic banks entering the market and most importantly, some conventional banks converting to full-fledged Islamic banks. In the years ahead, the Sultanate of Oman could in fact become the model for Islamic Finance through application of its organised, systematic and disciplined approach."
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