Bank Muscat’s Meethaq Islamic Banking was recently felicitated with the Award for Outstanding Contribution to Strategic National Development Initiatives at New Age Banking Summit 2018. Deputy CEO, Sulaiman Al Harthy talks about the rising prospects of Islamic finance in Oman and Meethaq’s plans for tapping potential areas of growth. Muhammed Nafie reports

How is Oman’s Islamic banking industry shaping up?

In the prevailing market conditions witnessing a slow recovery of oil prices, most of the Omani banks posted good results in 2017. In the Islamic segment, reflecting Islamic finance’s continued surge in popularity, Meethaq Islamic Banking performed extremely well in 2017. Bank Nizwa recorded its first profit last year, followed by Alizz in the first quarter of 2018. This bodes well for the whole industry. The Islamic finance industry is shaping up extremely well in the Sultanate. If you look at the figures in 2017, the performance of Islamic banks has contributed significantly to the growth of Oman’s banking industry in general. The year-on-year credit growth of the entire banking industry was about 7.2 per cent, while the net profit of all banks combined was 10.5 per cent. Bank Nizwa’s year-on-year growth was over 30 per cent while Alizz Bank registered a year-on-year growth of 40 per cent.

How was Meethaq Islamic Bank’s performance in FY 2017 and during the first quarter of 2018?

Meethaq maintained its leading position in the Islamic banking industry in Oman in terms of profits, financing, branch  network, Sharia compliant products and services, IT infrastructure and human resources. In 2018, we grew our assets by about 24 per cent compared to the first quarter in 2017. We grew our liabilities by about 12 per cent.

Meethaq was the first Islamic banking entity in the Sultanate to successfully launch the first Sukuk programme amounting to RO44.7mn. Meethaq launched the Accelerate SME portal, aimed at linking all important stakeholders involved in the SME sector. The portal reflects Meethaq’s commitment to fostering national talent and providing support for SMEs aimed at creating meaningful employment opportunities.

Yours was the first Sukuk programme issued by a financial institution in Oman. What about the potential of more Sukuks in Oman’s market?

Meethaq has taken approval for Sukuks worth RO100mn which will be issued in different tranches. The first tranche was for RO25mn which was oversubscribed and we collected about RO44.7mn. This was the first Sukuk of its kind in Oman. We were not the first company to issue Sukuk in the Sultanate, but ours was the first Sukuk by a financial institution in the country. It has opened up a new investment opportunity for many people. A lot of them called me in person to express their gratitude for creating such an opportunity. Sukuk is an investment option guaranteeing sustainable returns on your investment.

We have not yet decided on issuing the next tranche. However, we will come up with it at an appreciate time, after carefully studying the market situation. It is always better to issue the Sukuk in US dollars in order to attr act investors, especially Sharia-sensitive investors, from all over the world. There are so many prospective Sharia-sensitive investors looking for opportunities.

What were the major projects of national importance that Meethaq financed recently?

Meethaq provided Shari’a-compliant services and financing to various prestigious entities in Oman, including Muscat Municipality, Oman Munitions Production Company, Oman Cement Company, Oman Porcelain Company, Moon Iron & Steel company, Sebacic Oman, A’Namaa Poultry, Osool Poultry, Al Hayil Ceramic, Gulf Mushroom Product Company and A’Saffa Foods.

In 2018, Meethaq and Hydrocarbon Finder (HCF) signed an Islamic project financing facility for the development of oil and gas fields operated by HCF.

We are very excited about two specific projects in Duqm – Sebacic Oman and Little India. The former is ahead of schedule and hopefully they would start production very soon. They have already commissioned the machinery. Littlie India will do ground breaking within the next couple of months.

Another significant project under construction is Moon Iron & Steel Company (MISCO), a RO300mn steel plant coming up in Sohar. This is a very strategic project which will employ more than 400 people in the first phase and majority of them will be Omanis. The company has already started training Omani employees.

Can you talk about your ‘Accelerate SME’ portal and its role in fostering national talent?

We have developed “Accelerate SME Oman” portal in partnership with Thomson Reuters. This digital platform serves as the gateway for SMEs in the Sultanate. The portal provides startups and SMEs access to the most comprehensive source of business resources, services and funding solutions. The innovative portal is accessible on (http://meethaq.acceleratesme.om) and is designed to help SMEs achieve their business goals and thereby promote SME development in Oman. The primary objective of the ‘Accelerate SME Oman’ online platform is to provide guidance and help for SMEs to successfully navigate each stage of their business.

What about your ATM and branch expansion strategy?

Nowadays, owing to the accelerating growth of digital banking, people are conducting majority of their transactions and payments via mobile apps and cards. Therefore, we are more focused on expanding our digital footprint, making more of our customers use mobile applications and cards, instead of depending too much on branches and ATMs.

What are your new products and services?

The latest product we introduced is a new global sukuk. We have signed an exclusive partnership agreement with Italy head-quartered asset management company, Azimut Group to promote Global Sukuk Fund (GSF) in Oman. GSF is the first global sukuk fund to be offered in Oman and we recognize the immense prospects and potential that Oman offers as an investment destination.

What is your outlook for 2018?

We are as optimistic of 2018 as we were of 2017. The first quarter has been extremely good. Prospects are bright for the remaining quarters as well.

Can you talk about some potential areas of growth for Islamic finance in Oman?

Endowments (Awqaf) is an area where Islamic finance has a lot of potential to tap. Oman has a lot of endowment funds. The Ministry of Awqaf has issued an endowment law and now we are in the process of setting up a properly managed endowment fund to manage the endowments and grow them sustainably. They will have an investment committee and an audit committee. This is the idea we have floated. Zakat funds and mosque accounts are other potential areas where Islamic banks can play a pioneering role.