Her Highness Sayyida Wisam Jaifar Al Said, the Head of Marketing & Communications at Bank Nizwa, discusses sustainability in Islamic banking and financial inclusion in this enlightening segment with the Oman Banks Association.

Q) How has the Islamic banking industry evolved in the local market, and what is the future?

Compared to other nations, the Islamic banking industry in Oman is still at a nascent stage. However, today, the Sultanate is considered one of the fastest-growing in the GCC regarding Shari’ah-compliant banking services. According to Fitch Ratings, the Islamic banking sector in Oman is likely to sustain its positive trajectory in the short-to-medium term despite several structural challenges. Growing awareness about Sharia banking practices has created strong demand for Islamic products and services.

According to Fitch Ratings, a rising awareness of Islamic finance, strong retail interest, favourable legislation and vigorous promotion by conventional banks’ Islamic divisions will drive growth. The sector will likely prosper under better operating conditions as higher oil prices, the easing of COVID-19 restrictions and higher interest rates or profit rates contribute to its development.

As per the data issued by the Central Bank of Oman, the total assets of the Sultanate’s Islamic banks and windows increased by 10.7 per cent year-on-year to reach RO 6 billion in the first quarter of 2022. The Central Bank data further indicated that Oman’s Islamic banking assets presently account for 15.4 per cent of overall banking sector assets as of March 2022.

Q) What are the advantages of opting for Shari’ah-compliant products?

Islamic banks have been at the forefront of socio-economic progress, which is also in line with the principles of Shari’ah. Islamic banking promotes a more holistic approach to finances and just, fair and ethical practices. At a macro level, it has boosted financial inclusivity, accelerated economic development and brought about more excellent investment stability.

Islamic banking customers benefit from utmost transparency in financial dealings. As ethical businesses that encourage a savings mindset, Islamic banks take the necessary steps to guide clients through the risks and costs associated with products and services, thereby promoting more prudent financial decisions. Extensive audits conducted by Islamic banks also promote the reduction of investment risks.

Built on strong moral principles, Islamic banks also steer away from businesses that are harmful to society and instead resort to financing projects that have positive long-term effects on the economy.

Q) How important is the concept of sustainability in Islamic finance? 

Financial stability and economic growth, poverty alleviation and wealth distribution, financial and social inclusion as well as environmental preservation are all principles shared by Islamic finance. Aligning themselves to Oman vision 2040, Islamic Banks and windows have recently embarked on a sustainability journey, which has allowed them to capitalise on these similarities to become the suitable medium to propagate the elements of sustainable finance in the Sultanate. Now more than ever, Islamic Banks are committed to sustainable economic growth with minimal environmental impact and to promoting an inclusive financial and economic system.

Islamic financial institutions are devising sustainability-linked financing products and services that focus on helping clients integrate environmental, social and governance (ESG) criteria into their businesses. These tailor-made solutions encourage customers to finance activities that support the UN Sustainable Development Goals (SDG) and encourage customers to invest in practices that lower energy emissions.

Q) How have Islamic Banks collaborated to drive change?

Islamic banks have been playing a critical role in contributing to a more equitable distribution of income and wealth in the economy. Governed by Shari’ah principles, Islamic banks are uniquely positioned to catalyse economic sustainability. With a broad spectrum of innovative, value-based, and Shari’ah-compliant financial products, these banks have provided individual customers and larger corporate companies with different avenues to invest and grow their funds ethically.

Through strategic collaborations, the Islamic banks have together addressed key challenges such as legal and Shari’ah governance framework for Islamic banks in the country. At the same time, the banks have collectively made efforts to promote the implementation of international banking supervision, accounting, and audit standards. Through continued innovation, Islamic banks seek to encourage technology adoption while accelerating financial deepening and inclusion in the Sultanate.

With the support of the Oman Banks Association (OBA), Islamic Banks also consider raising awareness about Islamic finance a key driver toward financial inclusion. Banks have launched a coordinated awareness campaign with the support of OBA to support in reaching various segments to ensure they are aware of different financial solutions available to them.

OBA is a non-profit professional association created to represent the Omani banking sector, promote banking activities, coordinate with the regulatory authorities on matters of policy and strategy, and also support the collective effort toward banking excellence in Oman.