Fuelled by demand
Banks opening Islamic units
Islamic banks in Oman are growing at a faster pace than their conventional competitors, according to a report by the central bank.
The sultanate’s two Islamic banks, Bank Nizwa and Alizz Islamic Bank, and sharia-compliant units at other banks recorded higher growth in loans and deposits in the year to April 30, the report showed.
Islamic banking prohibits the payment or receipt of interest, considering it usury. Instead, income is earned through profit sharing or through transactions that are backed by tangible assets or services.
Financing by Islamic banks and banking units in Oman swelled almost 13 percent to OR7.1 billion ($18.5 billion) in the year to the end of April, the Central Bank of Oman said in the weekend report.
Deposits with Islamic units surged by nearly 22 percent to OR7.1 billion over the same period.
By comparison, the report showed credits from Oman’s traditional banks grew by around 8 percent year on year to OR26.4 billion. Deposits edged up by around 4 percent to OR16.7 billion.
Demand for sharia-compliant banking services in Oman has recorded relatively high growth over the past few years, especially as conventional banks opened Islamic banking units.
The demand is reflected in an increase in deposits with the two Islamic banks and other similar units, the Beirut-based Union of Arab Banks (UAB) has said.
Deposits there have almost doubled from around $9.2 billion at the end of 2020 to nearly $17.2 billion at the end of the third quarter of 2024, UAB said in a report in April.
The increase far outstripped growth in deposits with conventional banks in the sultanate, which rose by around 20 percent over the same period, the UAB said.
Oman’s banking sector has performed relatively well over the past few years, with net profits rising by nearly 15 percent to OR522 million in 2024.
