Oman's banking system consists of both conventional and Islamic banking, which is offered through full-fledged banks as well as windows of conventional banks (whether local or foreign banks licensed in Oman).
In May 2011, Central Bank of Oman (CBO) issued preliminary licensing guidelines to introduce Islamic banking in the Sultanate, under which full-fledged Islamic banks and Islamic windows of conventional banks to operate side by side with conventional banking institutions. This initiative was formalized in December 2012 through a Royal Decree that amended the Banking Law. The amendments, among others, required Islamic banks and windows to establish their own Shari'ah supervisory boards and authorized the CBO to establish a central High Shari'ah Supervisory Authority (HSSA).
Following these changes, the CBO issued a comprehensive regulatory framework, called Islamic Banking Regulatory Framework (IBRF) in December 2012, along with regulations for the HSSA. This move aligned with Oman's economic goals, which included promoting financial inclusion, diversification, and responsible financial practices.
Since the introduction of Islamic banking in Oman, this sector has demonstrated how it aligns strategically with – and acts as a catalyst for – achieving multiple objectives outlined in Oman Vision 2040. This sector has played a vital role in augmenting national savings and investment, contributing to the development of a more diversified investment base and availability of wider range of financial products and services for consumers and businesses.
Islamic banks and windows amassed total assets of OMR 7.0 billion, marking a 13.0% YoY increase. Financing from Islamic banking entities amounted to OMR 5.8 billion, with total deposits reaching OMR 5.3 billion, translating to a 17.6% market share in total assets and over 19% in both Islamic financing and deposits. This remarkable progress occurred in just over 10 years, signifying the sector's rapid growth.
As of December 2023, total assets of Islamic Banks and Windows increased by 14.7 percent on a Y-o-Y basis to OMR 7.35 billion and constituted about 17.5 percent of the banking system's assets. Financing from Islamic banking entities amounted to OMR 6.08 billion, with total deposits reaching OMR 5.51 billion, translating to a market share of 20.0% in financing and 18.9% in deposits of the banking sector. This asset growth is backed by a low non-performing financing (NPF) ratio of 2.1%.
In terms of physical presence, Islamic banks and windows have continued to expand their operations in almost all governorates and regions of the Sultanate with about 100 branches, coupled with onsite banking, mobile banking units as well as online and mobile banking platforms. This remarkable progress occurred in just over 11 years on introducing Islamic banking in the Sultanate, signifying the sector's rapid and impactful growth.