Oman Development Bank (ODB) is considering the launch of an Islamic window to offer sharia-compliant products to small and medium-sized firms, an executive said.
In December, Oman became the last country in the six-member Gulf Cooperation Council to adopt Islamic finance, issuing regulations for the sector. Developing Islamic finance and smaller firms are two policies which the government hopes will cut unemployment.
Government-owned ODB, founded in 1977, considered a full-fledged conversion to become an Islamic bank but is likely instead to opt for an Islamic window, said Hamed bin Salim Al Harthy, assistant general manager for branches at ODB.
“The bank will not move toward becoming a full Islamic bank but we have to keep up with the trend in the market, and the trend is for Islamic products,” he told Reuters.
Al Harthy said he did not expect the Islamic window to start operating before the end of this year since the bank was currently restructuring its operations.
ODB, which had a net loan portfolio of OMR100 million ($260 million) as of August 2012, already offers interest-free loans of up to OMR5,000 rials they are technically not sharia-compliant.
In March, the bank held a training course for its senior staff on Islamic banking products, which follow religious principles such as a ban on interest payments.
Although ODB is small, it could add competition to Oman’s fledgling Islamic finance sector. Central bank chief Hamood Sangour al-Zadjali said last week that the central bank had no intention of granting more permits for new Islamic banks or windows, but ODB is believed to already have permission in principle for a window.
Oman has two full-fledged Islamic banks, Bank Nizwa and Al Izz Islamic Bank, as well as several Islamic windows from conventional lenders.
Under the rules for Islamic windows, ODB would only be able to offer Islamic products through stand-alone branches, which would require converting some of its existing 15 branches or opening new ones.