Given the size of Oman's market, a full-fledged Islamic bank will secure the first-mover's advantage to win a significant market share in the country's Islamic banking sector, along with commercial banks which set up Islamic banking windows first, according to Islamic banking experts.
"If banks are to make the most of the new opportunity then they should be in hurry to get into the sector. Early comers in the industry will get a foothold in the market and will have a head start as far as marketing of Islamic finance products are concerned," said Dr Mabid Ali al Jarhi, financial expert and head of training at Emirates Islamic Bank in Dubai.
Dr Jarhi is also president of International Association of Islamic Economics and a member on the Sharia board of the Dubai Financial Market.
He was speaking to Muscat Daily on the sidelines of the Oman Islamic Banking Conference organised by International Turnkey Solutions (ITS), a global leader in Islamic banking technology solutions.
Dr Jarhi said that Oman should choose its Islamic banking model carefully and with some changes to the Gulf Islamic banking model. "As a late starter there is an advantage that Oman can easily avoid the mistakes of the Malaysian and Gulf Islamic banking models. If the regulatory environment is favorable to Islamic banking, the market in Oman could operate at levels that could compete with regional institutions. The Central Bank of Oman (CBO) should look at amending its existing laws, or preparing a new draft banking law to put Islamic banks on an equal footing with conventional banks."
He said that it would be a big challenge for banks to ensure an Islamic banking process separate from the conventional one. "The main challenge in setting up
Islamic banking windows is in separating funds for Islamic and conventional banking. Banks will have to ensure that separate financial statements are published to fully comply with Sharia laws."
Haitham Hani Abdou, marketing director of ITS, said that a start-up full-fledged Islamic bank will capture significant market share compared to conventional banks offering Islamic products. "There is going to be good demand for Islamic finance products and services in the beginning. I believe early movers will have a good advantage."
"Islamic banking window is a challenge for the banks in the beginning as maintaining two systems within a bank is quite challenging," Abdou added.
© Muscat Daily 2011
