Bank Nizwa is set to be Oman's first standalone Islamic bank, after the Gulf state moved to keep investment funds within its borders as local investors sought Shariah-compliant investments elsewhere. Bank Nizwa, which has won central bank approval, will be sponsored by Al Khalili Group and other local supporters, two sources familiar with the matter said on Monday.
The central bank said it will consider any application to open branches for Islamic banking by any bank operating in the sultanate wishing to provide such services." Analysts and bankers say it is too early to seriously consider Islamic banking services until the central bank provides adequate guidelines and changes its banking laws to truly accommodate the industry.
"Banks are saying that they are positive on Islamic banking and they are ready to offer Islamic products but they have to wait on the regulatory part," said Joice Mathew, head of research at United Securities, adding banks were unlikely to take action before the end of the year.
While neighbouring Gulf states have ramped up Islamic finance services in recent years, Oman stood out by refusing to participate in the industry, with its central bank head saying in 2007 "banks should be universal". The central bank reversed that stance earlier this month.
Following Oman's decision to allow Islamic banking, Bank Dhofar began preparations but, a source familiar with the matter said, was now having second thoughts and holding off until official guidelines have been set. The Islamic finance sector is estimated to be $1 trillion in size and growing at 15-20 percent a year, according to PricewaterhouseCoopers estimates.