Khaled Al Kayed, CEO of Bank Nizwa, talks about the growth potential and challenges of Islamic finance industry in Oman as well as his bank’s strategy to take the burgeoning sector to the next level of development. Excerpts from an interview

HE Taher bin Salem bin Abdullah Al Amri, executive president of Central Bank of Oman, was recently quoted saying that  the Sultanate had one of the highest Islamic assets rates in terms of growth and all the indicators for this were encouraging. How is the regulatory environment helping Oman’s sharia- compliant industry to thrive and prosper?  

Since the inception of Islamic finance industry in the Sultanate, consolidated efforts have been taken to develop and institutionalise the sector by structuring Sharia- compliant financial products.

I believe that the industry, in such a short period of time, has been successful in reaching out to communities across the Sultanate and presenting a viable and competitive alternative to conventional banking. This success is contingent on having a clear regulatory and Sharia framework. The Central bank of Oman (CBO)’s Islamic Banking Regulatory Framework (IBRF) is a guiding document for all Islamic bank which has made a great contribution in implementing uniform standards across the country. This has helped in creating a culture that fosters growth of the industry making it mainstream in the next few years to come.

Oman’s uniquely balanced approach to Sharia-compliant banking is overseen by the Sultanate’s governing national Sharia board, which created a climate for all banking institutions including Bank Nizwa to thrive by adopting one set of regulations for the country’s entire Islamic banking sector. As banks in other nations established their own rules for Sharia-compliant solutions, Bank Nizwa succeeded through strong governance and the adoption of the board’s Oman-wide regulatory system. 

How are the Islamic banks in Oman, including yours, negotiating the challenge of lack of liquidity in the market?

While the general consensus in the marketplace is low liquidity, Islamic finance is appealing to both individuals and corprorates to invest in and leverage Sharia-compliant solutions. The growth of Islamic banking in the Sultanate has been phenomenal reaching, according to the CBO, 13.6 per cent of the total assets of the banking sector in Oman, as of the end of July 2019. We realise that there is a decrease in the cash balance with CBO, due to investments in government development bonds and money market placements.

For us at Bank Nizwa, we have a multi-industry portfolio of investments, divided between retail and wholesale banking.  We recorded the highest growth rate in Oman’s banking sector with RO7.5mn in net profit, representing a 98 per cent growth after tax for the period ending December 31, 2018.  We will continue to leverage our growing presence in communities across the Sultanate to overcome the market’s deposit restraint. We focus not solely on retail customers, but also on wholesale banking and wealth customers. Offering tailored services that meet their requirements will always be our top priority to attract them to avail of our products and services.  Bank Nizwa is offering competitive Sharia- compliant solutions in line with our strategy to be the bank for all. We have been behind some significant deals with partners ranging from real estate to energy to technology. The diversification will help the banking sector diversify its liquidity sources.

What are the other key challenges facing the industry?

The business environment in 2019 continued to be challenging for the banking industry in general, given slower growth rates in some key economic sectors, more restrained liquidity and greater competition in the market.  Despite these challenges, Islamic finance has proven its sustainability and resilience in the market, as customers opted to utilise Islamic finance in Oman in such a short period of time. In order to ensure this continued growth in the industry, it is essential to transform challenges into the opportunities that can be leveraged.

 How is the Islamic banking industry, in general, adapting to the latest developments in the banking sector such as digitalization, Fintech, crypto currency etc. 

The banking industry is experiencing disruption every step of the way. Islamic banking has been growing at an immense pace, and we need to be competitive in the marketplace with our conventional counterparts. Our customers have been at the heart of everything we do, as we move forward with our strategy to be the bank of for all.

How was the year 2019 for you so far?

Our strategy is seeing us lead in market share. We provide across- the board access to Islamic finance, banking and investment. As the largest and fastest growing full-fledged Islamic bank in the Sultanate, Bank Nizwa is leading the sector’s growth by diversifying its portfolio into a multitude of industries. We are constantly pushing boundaries and our ambition is to provide progressive Sharia-compliant solutions for all.

During 2019, Bank Nizwa’s financial results have been consistent with its performance. Demonstrating strong resilience and performance across all its departments, the bank’s latest financial results for the period ending September 30, 2019 show total assets grow by 18 per cent to reach RO967mn, compared to RO820mn in 2019, while its total customer deposit portfolio reached RO762mn, achieving a growth of 15 per cent year-on-year.

What is your future outlook for 2020 and above?
Our success story looks set to continue as we increasingly reach out to more new customers and communities across the Sultanate and beyond. Getting more corporates and small and medium enterprises to utilise the banking solutions amiable in our sector would mark a new step for the industry to gain more popularity and market share.

Our strategy is built around innovation, efficiency and the deeply inherited values in Islamic finance. As an active corporate citizen, the bank keeps the overall wellbeing of society at the core of its values and purpose.

I am confident that together with our stakeholders, we will be able to nurture the Islamic banking sector and deliver even greater benefits to the communities we serve. Focused on enhancing our products and service portfolio, system and building a stronger human capital, we are taking step forward toward achieving our 2020 strategy for growth and development.

The future holds myriads of opportunities and we are at the heart of it, devising next steps to raise awareness about Islamic banking. Our strategy is simple: harnessing innovation and technology for a sustainable growth of our operations. Building on our success to date, Bank Nizwa’s roadmap for the future is centered on delivering an unparalleled customer experience, driving core business efficiency, fostering a high-performing working environment and enhancing our agility to adapt to rising trends.

Tell us about your initiative for providing customers with innovative products and services

Bank Nizwa has been consistently introducing forward-thinking products and services such as its online and mobile banking solutions. Contributing to the economic diversification efforts led by the Omani government, the bank expanded its services to cater to SMEs, corporate and commercial customers, while providing tailored services across diverse global and local market segments and industries. In addition, Bank Nizwa is the first Islamic bank to offer special Sharia-compliant banking services catering specifically to women. The retail banking division has continuously worked towards redefining the banking experience in the Sultanate by providing customers with innovative products and services that are true to the principles of Islamic finance.

Islamic bank is a fairly new industry in Oman and Bank Nizwa is Oman’s first full-fledged Islamic bank. How does the bank nurture and grow the next generation of experts to lead the industry into the future?  

We are committed to empower Omani experts to develop the necessary expertise to lead the growth of our operations at Bank Nizwa, while also adding to the pool of talent in the Sultanate in order to take the Islamic finance sector from strength to strength. We believe that people are the driving force behind any organization’s success and have dedicated time and efforts to attract and develop Omani talent and impalement effective succession planning to provide a pipeline of future leaders for us and the industry in general. Bank Nizwa has achieved over 91 per cent Omanization rate, which is in itself a high achievement given the Islamic finance sector is still in the infancy.