May 31 2011
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CBO nod for Islamic banking
Following His Majesty Sultan Qaboos bin Said's directive, Central Bank of Oman ( CBO ) has approved the establishment of an Islamic bank in the sultanate and Islamic windows for banks operating in the sultanate.
CBO 's board of governors met on Sunday under the chairmanship of Dr Ali bin Mohammed bin Moosa, deputy chairman of the board.
The CBO board also approved the application submitted by Sheikh Saud bin Ali al Khalili to establish a new Islamic bank in the sultanate under the name 'Nizwa Bank'.
Bankers in Oman are awaiting CBO guidelines to introduce finance products based on Shariah. Bankers believe that the presence of Islamic banking windows in the banking system could lure funds into Oman.
Margaret Purcell, chief economist at BankMuscat, said that the introduction of Islamic banking will bring in funds that are presently invested in Islamic banks offshore as well as funds that are presently not part of the formal banking system in Oman.
"It might also mean increased investments into Oman as Islamic funds are attracted to a new market." "The challenge for CBO will be to ensure that there is the right regulatory framework for Shariah-compliant finance. And banks will have to ensure that they have sufficient human resource skilled in Islamic finance," Purcell added.
Abdul Qader Askalan, chief executive of Oman Arab Bank, said that customers always look at costs and benefits associated with banking services.
"Since Islamic banking will be a new concept in Oman, customers will take time to decide whether to opt for Islamic banks or continue with commercial banking services. A segment of customers, who believe in Shariah-compliant products, would prefer Islamic banking. But most of customers will look at the cost associated with the services, benefits, safety and speed of services before they decide."
The board also approved the licensing policy for foreign exchange companies and the minimum capital requirements for these companies, which was raised to RO1mn for new companies alongside a RO100,000 deposit.
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