& By A. E. James & MUSCAT: Oman's first Islamic bank -- the RO150 million Bank Nizwa -- is expected to start operation by either towards the end of the year or early next year. "I think the bank will have a capital of RO150 million. Of this, 40 per cent will be offered to the public through an initial public offering," Hamoud bin Sangour Al Zadjali, Central Bank of Oman (CBO) executive president, told Times of Oman. The banking regulator recently gave an 'in principle' approval for the bank. The promoters, who have formed a founding committee, are in the process of establishing the bank. "We hope the bank to start operation by the end of the year or the beginning of next year." Sangour added that the CBO is now working on formulating a separate regulation for Islamic banks. "We will seek assistance from different parties (consultants) for formulating the regulation," he added. The CBO chief also noted that existing banks, intending to start window operation for Sharia-compliant products, can offer them through an existing BRanch and there is no need for opening an exclusive BRanch. "However, for offering Islamic products, the customers need to have separate accounts. The banks can either do it within an existing BRanch or an exclusive BRanch. It is up to them to decide. We will allow banks to offer these products through the existing BRanches." Several Omani banks are expected to launch Sharia-compliant financial products, once the banking regulator comes out with a set of regulation. The Omani banks, which have close association with regional institutions offering Sharia-compliant products, like ahlibank, BankMuscat, Oman Arab Bank and National Bank of Oman, will have an edge over others in offering these products in the local market. However, Sangour said none of the existing Omani banks have applied for a licence to offer Islamic banking products. Sources in banking sector said that there is a huge potential for Islamic banking in Oman as people (who parked their funds in other countries) are expected to BRing back their money parked in other Gulf Cooperation Council (GCC) states. Further, domestic demand for such products is also expected to be good. Unlike traditional banking, an Islamic bank provides the entrepreneur with funds for his business venture and gets a return based on a profit sharing ratio that has been agreed earlier. Oman is the only state among the six GCC members which is yet to set up a bank specifically offering products and services complying with Sharia law. An expert on Islamic banking recently said that the Sharia-compliant financial institutions may capture 10 per cent of the market share of the total banking assets within few years. Oman's banking assets are in the region of $40-42 billion and are growing at a healthy pace. Once Islamic banking products are properly rolled out, institutions can expect up to 10 per cent of the market going to Islamic in the first few years.

© Times of Oman 2011¬