Islamic banking is very interesting, but it is very much in the initial stages. There is a belief that huge reserves will return to Oman from other countries, meaning the Islamic banks will become very strong. It is also suggested that large numbers of consumers will open new accounts. I do not believe either of those things is likely. Our independent studies predict that anything from 1% to 15% growth in the market could come from Islamic banking sources, achieved primarily through housing loans to the public and other lending. Some of the larger corporates have already indicated that they want to show commitment to their faith through sharia compliance.
Former CEO, Bank Dhofar
Jamil Ak El Jaroudi
CEO, Bank Nizwa
There are many tools and instruments available in Islamic finance, ranging from the extreme pure trade to long-term equity. The fundamentals are that deals are based on sharia structures, although some looking at it from the outside feel that it looks similar to conventional finance, which is not altogether true. Nevertheless, a number of the same goals are achieved. Customers regularly ask about the difference between profit margin and interest rate. Essentially, the contract that guides the relationship makes the difference. The contract specifically contains the obligations of both parties. It also defines the rights of both parties very clearly. The crucial difference is that Islamic finance is based on assets, and we cannot advance cash.
Abdulaziz Al Balushi
Islamic banking will gain a share of 10% to 15%. The competition in Islamic banking will be based more on pricing than liquidity. I believe it is more about the relationship than the interest or profit earned when it comes to small depositors. Large depositors do not really care about whether it is an Islamic bank or not, and they tend to focus on the returns. I think there is growth, but I do not think it will impact heavily on traditional banking. If you look at other countries you can see growth in Islamic finance, but it is not a significant portion of the banking sector. Having said this, as one of the leading financial institutions in the country we want to be a leader in the Islamic finance sector.