Since Islamic banking and finance has become a reality in Oman following the Royal Directive, authorities have rushed to take necessary steps to establish a regulatory atmosphere for sharia compliant banking and investment.
The Central Bank of Oman (CBO) is following up to pave the way for Islamic banking's debut in Oman early next year and has already given the nod for establishment of two full-fledged Islamic banks, namely Bank Nizwa and Al Izz International Bank. Currently, commercial banks in Oman are in process to open the doors to Islamic banking services.
H E Hamoud Sangour al Zadjali, the executive president of CBO, has stressed on the necessity to make Islamic banking separate from funds, transactions, accounting and regulatory requirements and other financial requirements of the conventional banking system. "Banks are required to establish separate divisions for Islamic banking.
All the banks will have to ensure that conventional and Islamic assets and liabilities are not mixed up. It is important to ensure that Islamic financial activities are fully compliant with Sharia laws in Oman."
Apart from a Sharia compliant banking system, the Capital Market Authority (CMA) is working to set up a regulatory framework for other Islamic products like takaful (Islamic insurance) and sukuk (Islamic bonds).
CMA has already granted first takaful licence to Al Madina Gulf Insurance Company recently. As an alternative to conventional financing, CMA will soon allow companies to issue sukuk to raise funds in the local market.
"A few companies have approached CMA and evinced interest in issuing sukuk. There are also a lot of investors in Oman who want to invest in sukuk and are waiting for the opportunity. The government also could choose to finance its projects through sukuk issuance."
He added that CMA is preparing the ground for takaful and sukuk products and has sent teams to Malaysia and Bahrain to study how the markets for Islamic products work.
"The launch of new products like sukuk will follow the launch of Islamic banking here. We are educating ourselves and preparing the necessary regulatory infrastructure to supervise these products."
© Muscat Daily 2011
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