Financing by Islamic banking entities soars 61pc

Muscat—Financing provided by Islamic banking entities in Oman registered a significant growth of 61 per cent to reach RO 2.1 billion at the end of May 2016 when compared to RO 1.3 billion a year ago. Total deposits held with Islamic banks and windows also witnessed substantial increase of 80 per cent to RO 1.8 billion in May 2016 from RO 1.0 billion during the same period in 2015. The total assets amounted to RO 2.6 billion with an increase of about 64 per cent and constituting about 8.2 per cent of the total banking system.
“While this remarkable growth rate partly reflects the base effect, it also shows the success of Central Bank of Oman’s two-pronged strategy to allow full-fledged dedicated Islamic banks along with Islamic windows of conventional banks to take advantage of existing infrastructure of the conventional banks”, the apex bank said in its Sustainability Report for 2016. With over 70 per cent share in Islamic banking assets, the windows of conventional banks continued to dominate the Islamic banking sector.
“It is expected that the full-fledged Islamic banks will have a bigger role once they pass through the initial teething phase”, the report pointed out. At the same time, the report revealed that the two full-fledged Islamic banks continued to post pre-tax losses during 2015, whereas, four of the six Islamic windows have posted profits. The total pre-tax loss of the Islamic banks and windows was about RO 1.6 million in 2015. “The loss in the first few years of operations is not worrisome and the sector is expected to turnaround its bottom-line into positive while gaining market share”, opined the report.
The Islamic banking sector as a whole is gaining systemic importance, however, given its size the sector does not pose a systemic risk at the moment, added the report. Meanwhile, the total assets of conventional commercial banks increased by 6.1 per cent to RO 28.8 billion in May 2016 from RO 27.1 billion a year ago. Of the total assets, credit disbursement accounted for 66.9 per cent and increased by 10.4 per cent as at end May 2016 to RO 19.3 billion. Credit to the private sector increased by 12.2 per cent to reach RO 17 billion as at the end of May 2016.—Agencies

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