Oman central bank sets up Islamic banking department

The creation of a separate Islamic banking department will clear the way to develop the industry in the country

The Omani central bank has established an independent department to handle Islamic banking, it said on Wednesday, in a step expected to help further growth of the country’s fledgling sharia-compliant finance industry.

Oman was the last country in the six-nation Gulf Cooperation Council to introduce Islamic finance, granting licences to Al Izz Islamic Bank and Bank Nizwa in 2013.

Since then the industry has been expanding rapidly; as of January, total assets held by the two banks and the Islamic units of conventional banks accounted for about 5 per cent of total banking assets, central bank data showed.

The creation of a separate Islamic banking department appears to clear the way for two steps seen as critical to the long-term development of the industry: issuance of sovereign Islamic bonds, and the introduction of sharia-compliant money market tools.

The government has said it plans to sell its first sukuk, an issue of OMR 200m ($520m), in coming months, while a central bank task force has been studying Islamic money market operations.

The central bank’s statement on Wednesday said the new department would handle all Islamic banking matters, though the existing examination and surveillance departments would continue their supervision of banks.