Aug 26 2012
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Strong demand for Islamic banking products projected
MUSCAT -- Demand for Islamic banking and insurance products is expected to be fairly robust when Islamic banks, Islamic windows and Takaful companies formally roll out their products and services, starting from as early as the fourth quarter of this year. According to a prominent expert on Islamic banking, demand will be driven by a number of categories of potential customers who have been "waiting patiently" for Islamic financial services to become available in the Sultanate.
A veteran of green-field/start-up bank operations in both conventional and Islamic Banking, Yousaf has worked in senior positions with Citibank and Bank of America in the UK, Turkey, USA, Belgium, Greece and Pakistan. He has also worked in senior consulting roles in the IFC, EBRD and USAID-funded projects in Serbia, Georgia and Iraq. In his first media interview since joining KPMG Oman as Director -- Islamic Finance Advisory Services, Yousaf says he envisions demand for Islamic products and services to be "fairly strong" when they eventually come on the market in Oman.
Part of this demand, the expert explains, will come from investors who wish to deal only with Sharia-compliant banking products and services, the absence of which locally has led them to invest their funds with Islamic banks outside Oman. "Once Islamic Banking products become available in Oman, they're very likely to bring their deposits and investments back home and invest in Sharia-compliant products," Yousaf notes.
Yet another category of potential customers will be those who currently do business with conventional banks out of necessity and in the absence of Sharia-compliant options. They will very likely switch to Islamic banking as soon as it becomes available, he points out. The third category belongs to strict adherents of religious tenets who do not deal with conventional banks at all because they consider their activities as "haram" and "riba-based" and as a result, deal in cash only. "They're very likely to transfer their funds and use the services of Islamic Banks and Windows. Islamic Banking in Oman will also encourage Omanis resident abroad to deal with Islamic Banks and Windows back home," says Yousaf.
The KPMG Director is of the view that development of Islamic banking products and services in a new market like Oman will be gradual, rather than explosive. "Islamic banks will need to educate their target market customers about the Sharia-compliant aspects of their products and services, their competitive features and advantages over conventional banking. Customers who have a better understanding of Islamic banking will switch to it faster than others who may take the 'wait and watch' approach. There may also be skeptics who may challenge the Sharia-compliance aspects. Their objections and concerns would need to be addressed by the executive management and scholars in Sharia Supervisory Board of Islamic banks."
The Central Bank of Oman (CBO) has opened the door for the licensing of full-fledged Islamic Banks, as well as Islamic Windows of conventional domestic and foreign banks operating in the Sultanate. In the pipeline are two Islamic Banks, Bank Nizwa and Bank Al Izz. Also gearing 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.
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