Bank Nizwa is making its presence felt across Oman’s banking firmament, opening up new vistas of Islamic finance in the country. In a freewheeling chat with Muhammed Nafie, its CEO Dr Jamil El Jaroudi talks about the business plan and growth prospects of the bank .
Bank Nizwa is Oman’s first Islamic bank, and you are still in the first year of operation. How has been the initial response from the market?
We are only nine months old. The response has been phenomenal since we started operation in January 2013. From the day one, the excitement of people has been obvious from the way they rushed to all our three branches which we opened simultaneously in Muscat, Nizwa and Sohar. It was as if they were eagerly waiting for us to start operation. From our part, in order to expedite the procedures for opening accounts, we introduced latest technology which can read all necessary details from the ID cards, doing away with filling the applications manually. And we were the first bank to offer the customers their ATM cards and checkbooks before they leave the branch after opening an account. The response has been overwhelming during the month of Ramadan when we introduced a promotional campaign whereby customers don’t require to transfer their salary to get an auto finance from Bank Nizwa and they have the option to pay their first installment after two months of taking the finance. In addition to this, they will enjoy an excellent profit rate of 4.99 per cent.
What are the products and services you are offering currently?
We have introduced several products in the market such as current account, saving account, auto finance, house finance, personal finance, project finance etc. And we are planning to launch a new housing scheme very soon and another investment product before the end of this year. We will be introducing debit card services very soon while our credit card services are expected to be operational by 2014. We have already started our SMS alert and will be launching internet banking and mobile banking services very soon. Right now, we are bringing in a new product almost every month.
What about your plan to expand branch and ATM networks?
We started operation with three branches simultaneously in Muscat, Sohar and Nizwa. And before the end of the year 2013 we are looking to introduce five more branches that will open in Al Ghubara, Al Khoud, Ibra, Sur and Salalah. We are planning to open five branches every year in the near future. Meanwhile we are developing alternative channels such as internet banking and mobile banking to reach out to people. We have ATMs and CCDMs with all our existing branches, and in addition, in what actually can be our solution for a wider network, our customers will have access to the ATMs of all other banks in the country without any additional charge to them. Accordingly, all ATMs in Oman are ipso facto our ATMs, without carrying our logo.
How is the competition in the Islamic banking market, with almost all conventional banks opening their Islamic windows?
The market is too big that we don’t feel that we are competing with one another. We think competition is healthy and useful as it will help create awareness among people about Islamic products.
Can you elaborate on the Wakala contract that you recently signed with some Islamic windows?
Wakala contract is a formal network between us and other players in the market, which helps us place surplus funds with each other. In Wakala, one party acts as agent (wakil) for another to handle its money. Through this contract we are trying to standardise it instead of having different types of Wakalas in the country. As per the contract, we will engage them to place their money with us when they have excess liquidity or we can deposit with them whatever excess liquidity we have. It is a reciprocal relationship. So far we have three local windows signed up with us in the form of Maisarah (Bank Dhofar), Sohar Islamic (Bank Sohar) and Al Hilal (Ahlibank). We are in the process of signing similar agreements with other banks in Oman, which would help create a formal network enabling Islamic money markets to function.
How is the Islamic finance industry shaping up in Oman and what are the major challenges?
Islamic finance will play an important role in the economic growth of Oman. The housing scheme we are going to introduce offers a good opportunity for long-term investment. I think Islamic bank will play a bigger role in developing effective and long-term saving schemes for the citizens of the country. The potential for the Omani corporate Sukuk market is tremendous, and as the first Islamic bank, we envision playing a critical role together with our investment banking department to develop the local Islamic capital market. We have good expertise and resources in launching and managing sukuks, be it in primary markets or secondary markets.
One of the challenges is to work closely with the Central Bank of Oman (CBO) to develop the necessary regulatory framework for the industry. As you all know, the CBO already issued some regulations in the beginning but, as the industry picks up and gathers momentum you require amendments and further additions to the existing regulations.
Initially, Islamic finance in Oman was portrayed to be a business opportunity running into billions of dollars, with a wave of repatriated funds from abroad. Was it an overblown assessment?
It’s true that there is huge investment by Omanis in various Islamic banks outside the country. But we cannot make all of them invest here overnight. The Islamic banking industry in Oman is still in its fledgling stage and therefore an investor may consider it too early to invest here. There are two things to make them invest here: first they have to complete their period of investment abroad and, second, we have to give them an alternative offer similar to what they are receiving outside. That is not yet ready here because unlike conventional banks, an Islamic bank cannot tell people what it can give them back until its assets are placed properly which will take four to six months (Now we are studying many corporations before we extend funds to them). But a conventional bank can attract investments through various offers such as identifying the interest rate to be paid in advance. However prospects are bright for Islamic banks in Oman. The more you are interacting with the Omani market, the more you find people are thirsty and eager for Islamic products.