Muscat - With the rapid expansion of Oman's economy and development projects, Islamic finance will have to play a significant part to meet increased funding requirements, according to H E Yahya al Jabri, chairman of the Special Economic Zone Authority at Duqm (Sezad).
Speaking at the Islamic Banking Knowledge Forum, organised by Bank Nizwa on Thursday, H E Jabri said that funding and investments are integral to the Duqm Special Economic Zone, and other new projects in the sultanate.
He said, "I believe, in the near future, Islamic finance will contribute a significant, if not a major portion of the funding requirements. With continued dedication from authorities and Islamic banking players, it is my hope that one day Oman's economy will be primarily driven by Islamic finance - which would be a natural option for us."
"But we must also acknowledge the fact that we all grew with conventional banking. Thus, the transition will not come easy. The potential, however, is huge if we can overcome the initial barrier."
H E Jabri said that global Islamic finance investments are now already worth US$1.8tn - with the industry forecasting this to grow to US$2.5tn by 2015.
"With the expected rapid expansion of Oman's economy, this is the right time to tap and be part of this global phenomenon. We need financing and we need investments to come to Oman. So, we have to play our part in developing the right platform, and also to be in line with the best global Islamic finance practices to be able to make ourselves appealing to international investors," he said.
"On our part, we must examine ways of removing barriers that may curtail the growth of the Islamic finance industry. We must look at the tax system and all applicable fees to ensure that Islamic finance transactions are not penalised."
H E Jabri added that Sharia'a-compliant liquidity management tools must be in place to help Islamic finance players manage short-term liquidity. "In this respect, the government intends to tap into the sukuk space, which could, to an extent, bridge that gap. We must also look at ways of promoting Islamic finance education, training and research expertise to be able to support the needs of the industry."
He said that Islamic finance also holds huge potential as an investment-diversification option. "Unlike conventional banks, Islamic lenders participate in transactions driven by a profit-sharing motive. This reduces the typical lopsided risk seen in conventional banking and puts huge leverage factors onto the balance sheets of banks."
Aimed at creating a platform for discussing the way forward for Islamic finance in Oman, Bank Nizwa's inaugural Islamic Banking Knowledge Forum brought together prominent international Islamic finance experts and officials.
The panel of speakers included Dr Khalid al Fakih, secretary general of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI); Najmul Hassan, director of the Islamic Corporation for the Development of Private Sector (ICD) - a subsidiary of the Islamic Development Bank (IDB); and Dr Jamil Jaroudi, CEO of Bank Nizwa.
In his speech, Dr Jaroudi said, "We would like to continue our efforts to spread greater awareness and understanding of how Islamic finance can fulfil the needs and requirement of corporate clients."
He added that Bank Nizwa, which has built a network of seven branches in a very short time, would soon launch four more branches.
© Muscat Daily 2014
