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Prospects and challenges of Islamic Banking Oman Economic Forum 18 March 2014

Dr. Jamil El Jaroudi. Prospects and challenges of Islamic Banking Oman Economic Forum 18 March 2014 . Country Banking Sector Performance . 6 %. 14%. Financing after robust growth in 2012 reduced to single digit in 2013

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Prospects and challenges of Islamic Banking Oman Economic Forum 18 March 2014

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  1. Dr. Jamil El Jaroudi Prospects and challenges of Islamic Banking Oman Economic Forum18 March 2014

  2. Country Banking Sector Performance 6% 14% • Financing after robust growth in 2012 reduced to single digit in 2013 • 2014 outlook remains positive for growth in financing as major projects start 1 – CBO Monthly Publication December 2013 – www.cbo.oman.org

  3. Country Banking Sector Performance 10% 11% 18% 13% • Growth in deposits outpaced growth in credit resulting in increased liquidity • Core capital growth continued to be in double digit ensuring sector capital adequacy ratios remained healthy 1 – CBO Monthly Publication December 2013 – www.cbo.oman.org

  4. Country Islamic Banking Sector Performance • Growth in financing using Islamic modes has outpaced the growth in deposits. • The modest share in the first year of operations is an achievement as innovators have tested the waters. 2014 and 2015 will see acceptance across the masses. Published financial statements – 2013 - www.msm.gov.om

  5. Country Banking Sector Prospects Prospects for Islamic finance are very bright • Clear appetite and desire for Shari’a compliant finance • Policy development • Vision and Leadership shown • Pertinent and effective change to Banking Act • Comprehensive set of regulations for Islamic banking • Country level Shari’a Board at CBO (first in GCC) • Positive response from Industry • 6 Islamic Banking windows • 2 Fully fledged Islamic Banks • 2 Takaful companies – one more planned • First Shari’a complaint Sukuk issued in 2013 • Performance of Islamic Banking in 2013 • Leading Indicators: Customer acquisition, Branch network, Product development • Lagging Indicators: financial results of the Islamic banking Industry

  6. Country Banking Sector Prospects cont. • Financing is forecasted to grow at a cumulative aggregate growth rate of 7% • The sector is forecasted to remain liquid with deposits increasing at a CAGR of 7% Source: Business Monitor International

  7. Challenges Facing Islamic Banking • Instruments for Liquidity Management • Harmonization of Shari’a standards and Product development • Awareness and Education • Geographical coverage • Fine-tuning of policies and rules to better align with nature of Islamic banking • Advantage for window’s vis-à-vis full-fledged Islamic banks (e.g. Parents’ net-worth) • Legal system in terms of defaults and Takaful claims have not been tested

  8. “Thank You”

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