Definition
Islamic banking is a system of financial intermediation that operates in accordance with Sharia (Islamic law) principles. The most fundamental rules prohibit riba (interest), gharar (excessive uncertainty), and maysir (gambling). Instead of lending money at interest, Islamic banks use contracts such as murabaha (cost-plus sale), ijara (leasing), musharaka (partnership), and mudaraba (profit-sharing) to provide financing. Depositors share in profits and losses rather than receiving a fixed interest rate.
Context in Oman
Oman was the last GCC country to introduce Islamic banking, with the Islamic Banking Regulatory Framework issued by the Central Bank of Oman in December 2012. Bank Nizwa became the first full-fledged Islamic bank in 2013, followed by Alizz Islamic Bank (now merged into Ominvest). Several conventional banks also operate Islamic windows. The sector has grown rapidly, capturing roughly 15 percent of total banking assets by 2023. Oman regulatory framework is considered robust and has attracted positive reviews from international Sharia governance bodies.
Key Data Points
| Metric | Value |
|---|---|
| Islamic banking launch year | 2012-2013 |
| Full Islamic banks | 2 (Bank Nizwa, Alizz Islamic) |
| Islamic windows at conventional banks | 6+ |
| Islamic banking share of total assets | ~15 % |
| Key regulator | Central Bank of Oman |
Vision 2040 Connection
Vision 2040 promotes financial sector deepening, and Islamic banking plays a key role in broadening access to Sharia-compliant financial products. The strategy supports growing the Islamic finance market to attract investment from regional and global Islamic investors, complementing sukuk issuance and takaful insurance in building a comprehensive Islamic financial ecosystem.
Further Reading
- [[What is Sukuk]]
- [[What is Takaful]]
- [[Oman Banking Sector Overview]]