17% of total banking assets
Increase outstrips conventional banks
Facilitates growth in lending
Demand for shariah-compliant Islamic banking services in Oman has rocketed over the past four years despite the dominance of conventional banks.
High demand was reflected in a sharp increase in deposits with the Gulf country’s two Islamic banks, the Beirut-based Union of Arab Banks (UAB) said.
Deposits with Bank Nizwa and Alizz Islamic Bank, the sultanate’s only shariah-compliant banks, and Islamic units at other banks, leapt from about $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 its monthly magazine.
The increase far outstripped growth in deposits with conventional banks in the sultanate, as it did not exceed 20 percent, the report said.
The surge in deposits with the two Islamic banks boosted their total assets from about $12.7 billion to $21.4 billion in the same period.
The official Omani news agency said in a report last year, citing Central Bank data, that the assets of Oman’s two Islamic banks accounted for nearly 17 percent of the total assets of Oman’s banking sector, which includes 20 banks comprising two government-owned units, seven commercial banks, two Islamic units and nine foreign banks.
The UAB report showed the increase in the deposits of the two Islamic banks allowed them to sharply increase lending to nearly $17.2 billion by the end of the third quarter of 2024 from about $10.6 billion at the end of 2020.
The two banks have also raised their capital base in line with Central Bank instructions, with their capital and shareholder equity swelling from about $1.5 billion to nearly $2.4 billion in the same period.
Islamic banking is based on two fundamental principles, which are the sharing of profit and loss and the prohibition of the collection and payment of interest by lenders and investors as interest is considered in Islam as usury.
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