The government of Oman has approved the establishment of Islamic banking, allowing lenders to run Sharia-compliant operations for the first time in the Gulf state, Reuters reported.
The country, which led by Sultan Qaboos, will also allow conventional banks to offer Sharia-compliant products and services in a bid to clinch a share of the growing Islamic finance market.
Oman is the last country in the six Gulf Cooperation Council (GCC) members to enter the Islamic banking business.
“His Majesty approved the establishment of an Islamic Bank and allowing the banks in the Sultanate to open new branches if they wish so,” a circular posted on Oman news agency said.
The Islamic finance industry is estimated to be worth $1 trillion worldwide.
Regardless of the global economic downturn, the Islamic finance sector showed increasing growth in past years, about 20 percent annually over recent years, according to audit firm Ernst & Young.
The industry is expected to grow by between 15 percent to 20 percent annually going forward, according to a report in November 2010 by PricewaterhouseCoopers.
With a population of three million, Oman has an annual GDP of $76.5 billion and a GDP per capita of $25,800.
Qatar had banned conventional banks from offering Islamic finance services in February, in a move to support the Islamic banks in the country.
Analysts are waiting to see how traders will react to Oman’s Islamic finance push and how it will hit Tuesday’s bank index.
(Eman El-Shenawi of Al Arabiya can be contacted at firstname.lastname@example.org)