Legal Framework for Islamic Finance
The legal foundation for Islamic finance was established by Royal Decree 69/2012, which amended Banking Law 114/2000 to introduce Islamic banking provisions. These required Islamic banks and windows to establish their own Shari'ah
supervisory boards and Central Bank of Oman (CBO) to establish a central High
Shari'ah Supervisory Authority (HSSA).
The sector is now governed by the updated Banking Law 2/2025, specifically Chapter Five, Articles 125 to 134, which sets out the current legal provisions for Islamic banking activities and supersedes the earlier framework.
Banking Law 2/2025 also empowers the CBO to license and supervise a broad range of financial activities, including finance and leasing companies (FLCs), payment service providers (PSPs), money service businesses (MSBs), FinTechs, and loan-based crowdfunding platforms, which may be licensed to operate in accordance with Shari'ah principles.
Read:
Banking Law 2/2025
Regulatory Framework for Islamic Finance
The Central Bank of Oman regulates the Islamic finance sector through regulations, instructions, and guidelines issued via various circulars and circular letters.
The Regulation on Establishing and Organizing the High Shari'ah Supervisory Authority (HSSA) in the Central Bank of Oman (BM/REG/54/12/2013), issued in December 2013, sets out the functions, membership, fit and proper criteria, and other operational matters relating to the HSSA.
Read:
Regulation on Establishing and Organizing the High Shari'ah Supervisory Authority
The Regulation on Islamic Banking Business (BM/REG/56/4/2019), issued in December 2019, provides updated requirements relating to licensing for conducting Islamic banking business, Shari'ah governance, charity accounts, accounting standards, external audit, and disclosures.
Read:
Regulation on Islamic Banking Business
The Islamic Banking Regulatory Framework (IBRF), issued in 2012, outlines the regulatory requirements for Islamic banks and Islamic windows in Oman. It covers key areas such as licensing, governance, accounting standards, capital adequacy, and risk management. The IBRF serves as the cornerstone of regulatory oversight for Islamic banking institutions operating in Oman and aligns with international standards issued by bodies such as AAOIFI and IFSB.
Read:
Islamic Banking Regulatory Framework (IBRF)