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

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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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country banking sector performance
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

country banking sector performance1
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

country islamic banking sector performance
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

country banking sector prospects
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
country banking sector prospects cont
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

challenges facing islamic banking
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
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