Oman's Islamic banking assets hit Ro7.5bn as market share rises
Oman’s Islamic banking sector continues to record robust growth, driven by strong demand for Shariah-compliant products and supportive regulations.
The total assets of the sultanate’s Islamic banks and windows grew by 16.3% year-on-year, reaching Ro7.5bn by the end of January 2024, according to data released by Central Bank of Oman (CBO) on Tuesday.
As of the end of January 2024, Islamic banking assets in Oman now constitute 17.6% of the total banking sector assets, as per the central bank’s data.
The Islamic banking entities provided total outstanding financing worth Ro6.2bn as of the end of January 2024, recording a robust growth of 12.7% over the previous year. The corporate sector drove the majority of Islamic financing flows, followed by the household/retail sector.
In contrast, conventional banks showed slow growth of 1.8% in total outstanding credit in January 2024.
Total deposits held by Islamic banks and windows grew by 14.9% to Ro5.6bn at the end of January this year, compared to the previous year. On the other hand, aggregate deposits of conventional banks increased by 12.3% in January this year.
The CBO, in its Financial Stability Report for 2023, stated that Islamic banking's importance is on the rise in Oman as it contin
Market share of Islamic banking in total banking sector assets has increased to 17.6% as of January 2024. Islamic banking entities provided total outstanding financing worth Ro6.2bn as of January, recording a robust growth of 12.7% over the previous year
uously captures a larger market share. The sector has been growing in tandem with the improving economic conditions.
According to Moody's Investor Service forecasts, Oman’s Islamic banking industry is projected to reach around 20% of overall banking assets by 2025, driven by high demand for Shariah-compliant products and evolving supportive regulation.
Similarly, Islamic Finance News (IFN), in its Oman Country Report 2024, mentioned that 2023 was a very positive year for Islamic finance in the sultanate. IFN stated, 'Given the initiatives being undertaken by the principal regulators of the industry, Oman's Islamic finance industry should continue to grow in 2024 and is expected to break the 20% barrier with respect to Islamic assets’ share of total banking assets in the country.'
Moody's view suggests that the Islamic banking industry in Oman is poised to maintain its growth momentum ahead of conventional banks, supported by favorable oil prices and ambitious economic diversification agendas across the GCC countries.
As per the rating agency, the profitability of Islamic banks in the GCC is projected to remain robust in 2024, surpassing that of their conventional counterparts. This is due to Islamic banks’ controlled provisioning needs and sustained net profit margin advantage over conventional banks, despite a slight decline.
Moody’s believes that Islamic banks in Oman and GCC countries have ample capital and liquidity to support further growth. The agency underscored that these banks will maintain strong capital and liquidity buffers, allowing them to cater to the strong demand for Shariah-compliant financial services.
The Islamic banking segment in Oman consists of two fullyfledged Islamic banks – Bank Nizwa and Alizz Islamic Bank – as well as five Islamic banking windows of conventional banks, all established during 2012 and 2013.
Islamic windows of conventional banks play a significant role in driving growth, accounting for approximately 40% of sector assets, with the remainder held by full-fledged Islamic banks, according to Fitch Ratings' estimates.
Fitch also believes that Islamic banking's growth in Oman will be driven by substantial public demand for Islamic products, supportive regulations, an expanding branch network, and the engagement of conventional banks’ Islamic windows.