I LEGISLATIVE AND REGULATORY FRAMEWORK

i Legislative and regulatory regime

Oman's Islamic finance industry, albeit recently developed, has rapidly become one of the most heavily regulated sectors in the country. This degree of regulation correlates with the rapid growth of the Islamic finance industry in Oman, which grew by an impressive 14 per cent in 2018 according to Moody's.2

Islamic banking was formally introduced in Oman by Royal Decree (RD) No. 69/2012, which amended RD No. 114/2000 (the Banking Law) by adding a new chapter dedicated to Islamic banking. Subsequently, the Central Bank of Oman (CBO) issued circular IB 1/2012, promulgating the Islamic banking regulatory framework (IBRF), which is a sophisticated regulatory guideline setting out the requirements and conditions for the undertaking of shariah-compliant commercial and investment banking activities and the offering of shariah-compliant products in Oman.

The IBRF regulates the following areas: licensing requirements, general obligations and governance, accounting standards and auditor reports, supervision and control, capital adequacy, credit risks, market risks, operational risks, liquidity risks and miscellaneous matters. The IBRF provides for the right to set up fully fledged Islamic banks and Islamic windows of conventional banks and it sets out the process and requirements to be followed when applying to the CBO for an Islamic banking licence. In this respect, it is to be noted that domestic banks, foreign banks and Islamic windows are required to have paid-in capital of no less than 100 million Omani rial, 20 million rial and 10 million rial, respectively, which may be subject to higher capital requirements imposed by the CBO.

Additionally, the IBRF specifies the criteria, requirements, specifications and risks of each type of Islamic finance product (e.g., ijarah, murabahah and mudarabah). In this regard, the IBRF expressly prohibits tawarruq (i.e., commodity murabahah), which, although frowned upon by the majority of Islamic scholars, is allowed in several GCC countries, including Saudi Arabia. Therefore, Oman's position regarding tawarruq is much more stringent than that of other GCC countries.

Further, the IBRF is very comprehensive and focuses on the transactional and operational shariah compliance of all licensed Islamic financial institutions in more detail than most GCC countries. In this respect, the IBRF leaves the task of verification of shariah compliance of Islamic banking transactions to qualified shariah boards and shariah auditors within each licensed Islamic bank or Islamic window, and does not provide for a centralised authority for the auditing of Islamic banking transactions. The professional requirements, and perquisites, for the members of shariah boards are provided by the IBRF, and are not left to individual banks to regulate. It should be noted that a central shariah authority was established in 2013 by CBO Regulation No. BM/54/12/2013, inter alia, to advise the CBO in relation to shariah-compliant transactions and settle shariah-related disputes that may arise among the shariah auditing boards of financial institutions in Oman.

The shariah-compliant capital market sector has been formally expanded with the amendment of RD No. 80/1998 (the Capital Market Law) by RD No. 59/2014, which expressly recognised the ability of companies listed on the Muscat Securities Market (MSM) to issue sukuk. Subsequently, and on the basis of the amendment to the Capital Market Law, Decision No. 3/2016 Issuing Sukuk Regulation (the Sukuk Regulation) of the Capital Market Authority (CMA) specified the procedures and requirements relating to sukuk issuances in Oman. Sukuk, as provided by the Sukuk Regulation, can be issued either directly by the beneficiary or originator, or through a trustee or an agent. Notably, the Sukuk Regulation's treatment of the function of 'trustee' is unprecedented since no concrete definition of this function (even outside the context of finance) has been provided by Omani law in the past.

As regards Oman's takaful industry, RD No. 11/2016 (the Takaful Insurance Law) provides a robust and comprehensive framework covering all aspects of the takaful insurance sector and regulates all aspects of a takaful operator's activities (e.g., oversight and reporting requirements, product standards and liquidity levels) subject to the oversight of the CMA, which has been tasked with regulating and supervising takaful operators in the Sultanate. The Takaful Insurance Law requires takaful insurers to be publicly listed on the MSM and to have capital of no less than 10 million rial. Further, the Takaful Insurance Law requires takaful operators to form an internal specialised shariah committee for the purpose of auditing the takaful operator's shariah compliance. Other provisions of the Law govern the maintenance of solvency margins, fund setup and management, and the transfer of takaful business from one company to another. A draft takaful regulation is currently being prepared by the CMA.

There is no express legal or regulatory framework governing shariah-compliant investment funds. However, with regard to real estate investment funds or trusts (REITs), which are a sub-class of investment funds, CMA Decision No. KH/2/2018 (the REIT Regulation) makes several references to shariah-compliant REITs by providing, inter alia, for the necessity of establishing a shariah committee or using the services of a shariah board or third-party committee to ensure that the activities of the REIT are compatible with the principles of Islamic law. The REIT Regulation sets out the duties, characteristics, requirements and restrictions relating to the members of the shariah board to ensure their impartiality and objectivity when auditing the fund's shariah compliance. As with a conventional REIT, the licensing of a shariah-compliant REIT requires substantial minimum capital.

With the introduction of RD No. 18/2019, the new Commercial Companies Law (CCL), replacing RD No. 4/1974, the former CCL, new regulations and requirements have been introduced with regard to the issuance of both bonds and sukuk in a separate chapter. In addition, the CCL imposes a general requirement on commercial companies undertaking shariah-compliant activities to have their transactions comply with the principles of Islamic law, and it has tasked the CMA and the Ministry of Commerce and Industry (MOCI) to issue specific regulations on the shariah-auditing mechanisms to be implemented within such companies.

ii Regulatory and supervisory authorities

Regulators of the Islamic finance sector in Oman enjoy broad authority in terms of licensing and investigation and penalising of breaches of law. The primary regulators of the Islamic finance industry in Oman are the CBO and the CMA.

The CBO is the main regulator of Islamic banks and Islamic windows operating in Oman, and in this respect the scope of its supervisory and regulatory authority is set out in the Banking Law and the IBRF. The IBRF acknowledges that the Islamic banking business increases an Islamic bank's liabilities as it 'bestows greater burden of responsibility on Licensees so far as Shari'a compliance is concerned',3 and the CBO has affirmed that it will take serious note of and sanction appropriately any breaches of shariah principles by a licensed Islamic financial institution.

Pursuant to the Banking Law, the CBO has the authority (1) to license Islamic banks and windows, (2) to establish licensing regulations, procedures and conditions, (3) to inspect and audit the audited financial statements of Islamic banks and windows in Oman and to request clarifications in respect of these, (4) to investigate and audit the activities of Islamic banks and windows in Oman and, in this respect, to ask for and obtain any documents, information or clarification required by it, and (5) to issue guidance, mandatory instructions and warnings to licensed banks in relation to their activities. The CBO regularly issues publicly available circulars containing its instructions, recommendations and guidance to Islamic banks in Oman.

Among the more significant regulatory powers vested in the CBO, the latter is empowered to suspend the activities of a licensed bank either partially or wholly, to confiscate its assets and place them under its control, and upon the occurrence of certain events to impose fines or deny the licensee access to the credit facilities offered by the CBO, including if the licensed bank has breached, or there is proof that it intends to breach, the provisions of the Banking Law, the IBRF or the circulars issued by the CBO, or if the licensed bank becomes incapable of following the instructions and guidance of the CBO, or if the licensed Islamic bank has breached shariah rules and principles. The CBO also has the right to place a bank under its curatorship, which may result in the licensed bank's liquidation. Before imposing any penalty, the CBO may notify the defaulting licensee and grant it an opportunity to cure its breach.

The CMA is the regulator for takaful companies, shariah-compliant REITs and, more generally, public joint-stock companies carrying out shariah-related activities. With respect to takaful companies, the Takaful Insurance Law sets out the scope of the regulatory authority of the CMA. The CMA has the authority to receive, accept and reject licensing applications and to determine the process and requirements for the licensing of takaful insurance and related professions (e.g., takaful brokerage and agency).

The CMA also has the authority to inspect and investigate the activities of licensed companies to ensure compliance with the provisions of the takaful law and the CMA's instructions; in this respect, it has the power to (1) task an actuary at the expense of the licensed company to evaluate the company's assets, liabilities and overall financial situation and prepare a report for the CMA; (2) appoint a member on the board of directors of the licensee who will have the right to attend and observe the board meetings and express an opinion on resolutions, without being entitled to vote; (3) dissolve the licensee's board of directors and appoint a temporary administration committee for the purpose of managing the licensee; (4) suspend or cancel (either wholly or partially) the licence of the licensee; (5) issue warnings and impose penalties on the licensee; and (6) dismiss members of the board or the executive committee. The Takaful Insurance Law expressly provides that the CMA's officers and employees shall have judicial enforcement powers in the context of ensuring compliance by licensees with the provisions of the law.

With regard to the regulation of REITs (both Islamic and conventional) and public joint-stock companies (whether or not their activities are shariah-compliant), the CMA's supervisory responsibilities are largely the same, as both are based on the provisions of the Capital Market Law and Executive Regulation of the Capital Market Law No. 1/2009, issued by the CMA. The CMA is responsible for licensing REITs and public joint-stock companies and for setting out, to an extent, the licensing process and prerequisites. The CMA has the authority to investigate licensed entities and take disciplinary action against them by way of issuance of reminders and warnings, and by imposition of fines, suspension of dealings on the MSM for a period not exceeding three months and, finally, delisting such entities from the market. The CMA has the right to send observers to ensure compliance of unitholders' or shareholders' meetings with the procedures prescribed by law.

The CMA is also responsible for regulating issuances of sukuk in Oman and for the licensing of corporate entities seeking to issue sukuk in the country.

II COMMON STRUCTURES

i Deposit products

The great majority of Islamic banks and Islamic windows in Oman are domestic. There are currently two fully fledged Islamic banks, Bank Nizwa and Alizz Islamic Bank. Additionally, at the time of writing, there were six Islamic banking windows of conventional banks in Oman: Meethaq Islamic Banking (Bank Muscat), Muzn (National Bank of Oman), Maisarah Islamic Banking (Bank Dhofar), Sohar Islamic (Sohar International), AI Yusr Islamic Banking (Oman Arab Bank) and Ahli Islamic Banking (Ahli Bank).

Deposit accounts offered by Islamic banks and Islamic banking windows to customers in Oman generally comprise the following.

Islamic current account

This is essentially a qardh hassan-structured product (i.e., an interest-free loan structure), whereby the customer provides the bank with financing for the bank's shariah-compliant investment purposes. The principal financing amount is returned to the customer on demand without the addition of any profit or deduction of any losses.

Islamic savings account

This is an unrestricted mudarabah-based savings account (i.e., investment management-based) to which funds are transferred as capital by the customer, in its capacity as investor, to the bank as investment manager for the bank's shariah-compliant investment purposes. Should the bank achieve profit, this will be divided between the bank and the customer according to the pre-agreed rates. If, however, losses are incurred, these will be borne by the customer alone unless it can prove the bank's negligence, fraud or misconduct. There are many variants of this account (e.g., salary savings account, prize-draw savings account, term deposit account).

Wakala account

This is a wakala-structured account (i.e., an investment agency-structured account) whereby the customer, in its capacity as investor, transfers funds to the account maintained by the bank for the bank to invest on behalf of the customer in shariah-compliant investments. The bank performs its functions as investment agent for a predetermined fee. Should the profit achieved exceed the agreed profit rate, the bank becomes entitled to a portion of the profit as an incentive.

ii Consumer finance

The most popular form of shariah-compliant consumer financing in Oman is auto financing, commonly structured on the basis of murabahah. The customer requests that the bank acquire and sell the customer a specified car. The bank purchases the requested asset from a third-party supplier identified by the customer and resells it to the customer for a profit. Both the cost and profit margin (markup) are made known and agreed by all parties involved. The purchase price can be paid either on a deferred lump-sum basis or on an instalment basis. The bank typically appoints the customer as its agent for the purpose of dealing with the supplier and taking receipt of the car.

iii Home finance

Home financing is offered to customers in Oman through the ijarah muntahiya bittamleek structure. The bank purchases a property identified by the customer from a third-party seller, then leases it to the customer in exchange for payment by the customer of periodical rental instalments inclusive of profit component. The customer issues a binding undertaking to purchase back the leased asset from the bank at the end of the transaction. Upon final maturity, the bank exercises its right under the agreement to have the customer purchase the property.

In addition, home finance is also offered through the diminishing musharakah product, under which the customer and bank jointly acquire the asset on the basis that the customer will gradually buy out the bank's share of the asset.

iv Insurance

Takaful is shariah-compliant insurance whereby each participant (i.e., insured) contributes a specific monetary sum into a collective pool system (i.e., a takaful fund) for the collection of contributions from all takaful participants to protect and guarantee the other participants against loss. Each takaful participant's contribution is based on and determined according to the type of coverage sought (e.g., life, healthcare, property) and the participant's personal circumstances. The basis of takaful is mutual guarantee, cooperation, indemnity and protection of all participants covered by the takaful scheme. Thus, the objective of takaful is to diversify and distribute the risk of loss or damage among the participants.

Takaful companies in Oman are required by law to have the legal form of a public joint-stock company. The Takaful Insurance Law remains silent on the ability of foreign takaful companies to set up branches within Oman. Takaful companies offer the same types of products offered by their conventional counterparts. These include: family takaful, health takaful, creditor takaful, motor takaful, property all-risk takaful, fidelity guarantee, contractor's plant and equipment takaful, contractor's all-risk takaful, personal accident takaful, workmen's compensation takaful, marine cargo takaful, travel takaful, and fire and perils takaful, among others.

v Investment funds

Investment funds can either be incorporated in the form of a joint-stock company or be an unincorporated entity with legal personality. In the latter case, they are required to be formed by a commercial bank or an investment company whose capital should be no lower than 5 million rial. An investment fund can be either open-ended (i.e., its capital is subject to changes and variation because of issuance and redemption of new units) or closed-ended (i.e., the fund issues a fixed number of units, redeemable only upon expiry of the fund's term, but the fund retains the right to issue new units). The fully paid-up capital of the investment fund should be no less than 2 million rial and the share of its sponsors should not be less than 5 per cent of its capital. Units held by the sponsors are subject to a lock-in period of three years.

The majority of investment funds in Oman are established as open-ended unincorporated funds. Shariah-compliant investment funds remain limited in number compared to conventional investment funds. Examples of shariah-compliant investment funds in Oman include Al Kawthar Fund (established by Tanmia, which is a state-owned investment company) and Al Hilal Mena Fund (established by Ahli Bank).

vi Real estate investments

Real estate investment is conducted either through real estate investment companies, which typically take the form of a joint-stock company or REIT. The CCL constitutes the main legislation governing joint-stock companies in Oman. The CCL is complemented by the Capital Market Law and the CMA rules and regulations and code of corporate governance with respect to public joint-stock companies. The minimum capital requirement for a public joint-stock company is 2 million rial and 500,000 rial for a closed joint-stock company. The CCL provides that shariah-compliant commercial companies (including those carrying out real estate investment activities) must comply with the principles of shariah. The CCL further requires the CMA (the regulator of public joint-stock companies) and the MOCI (the regulator of closed joint-stock companies and other types of commercial companies) to issue a regulation on the shariah auditing mechanisms to be implemented within such companies.

Real estate investment companies are the dominant participants in the field of real estate investment. The other type of real estate investment vehicle recently recognised in Oman is the REIT. REITs, similarly to conventional investment funds, can be established either in the form of a joint-stock company, or as an unincorporated entity enjoying legal personality. All REITs are required to be closed-ended. The issued capital requirement is much greater than that for other investment funds, as REITs are required to have capital of no less than 10 million rial (or its equivalent in another currency). If the REIT is intended to be shariah-compliant, the investment manager is required to form a shariah committee or to engage the services of a third-party shariah committee. The qualifications and character required of the members of the committee are set out in the REIT Regulation. The REIT is also required to be managed by professional managers who are licensed by the CMA and have their main duties set out in the REIT Regulation.

vii Sukuk-based financing

Ijara muntahiya bittamleek is the most prevalent form of sukuk in Oman and has been employed repeatedly by the government in the context of sovereign debt capital market issuances. Ijara muntahiya bittamleek sukuk certificates are issued by the issuer and each certificate represents a portion of ownership in the underlying ijara assets as well as a right to the periodic distribution amount and dissolution amount generated by these assets. The subscription monies are collected by the issuer, in its capacity as trustee, and are used to purchase underlying ijara assets from the originator. The ijara assets are added to the trust portfolio and are subsequently leased back to the originator, who issues a promise to purchase back (for the benefit of the trustee and the sukuk holders) the ijara assets upon final maturity or upon the occurrence of an event of default. The originator, in its capacity as lessee, makes periodic rental payments, which are distributed to the sukuk holders by the trustee as profit payments. Upon final maturity or the occurrence of an event of default, the trustee exercises its rights under the promise to purchase, and the originator purchases back the ijara assets and pays the agreed purchase price.

In Oman, the ijara muntahiya bittamleek sukuk usually adopts an asset-based structure (i.e., the originator would issue a binding promise to purchase the leased asset, which the sukuk holders can use as recourse against the originator in the event that it breaches its obligations), rather than an asset-backed structure (i.e., the sukuk holders would only have recourse against the leased asset).

III TAXATION

The main legislation relating to taxation in Oman is RD No. 28/2009 (the Income Tax Law), which governs both Islamic and conventional businesses. The Secretariat General for Taxation (SGT) at the Ministry of Finance is the body responsible for enforcement of the Income Tax Law and for ensuring compliance.

There is no special or separate law governing the taxation of Islamic financial institutions, but the Income Tax Law contains a chapter specific to the income generated from Islamic financial transactions. The aforementioned chapter was recently introduced by RD No. 9/2017, which amended the Income Tax Law for the purpose of, inter alia, clarifying the tax position of Islamic banks as part of an overall tax reform. In this regard, the Income Tax Law currently provides for the taxability of any amounts generated from an Islamic finance transaction obtained by a taxpayer in lieu of interest, which effectively makes virtually all Islamic financial transactions profits taxable on a par with their conventional counterparts.

The Income Tax Law further provides that if the purpose of the transaction is to purely achieve a shariah-compliant objective without the transaction including any financial aspect, such as the leasing of real estate or a movable asset, or establishing usufruct thereon, the transaction will not be taxable. Hence, income generated from such a transaction (excluding any interest-like payments) will not be deemed taxable in accordance with Article 76 bis (3) of the Income Tax Law. The chapter relating to taxation of income generated from Islamic finance transactions also provides special rules concerning deduction of donation amounts paid by the borrower, the impact of credit losses on the calculation of the taxable income, and the submission by the taxpayer of evidence regarding specific matters when submitting its fiscal declaration or during the course of SGT decision-making regarding any petition filed by the taxpayer.

In addition to the Income Tax Law, other laws contain special provisions granting Islamic finance businesses certain privileges and benefits with regard to payment of governmental fees. In this respect, the Banking Law exempts banks licensed to carry out Islamic banking from payment of the governmental fees imposed on transactions involving ownership and leasing of real estate and movable assets conducted by such banks in the context of Islamic finance transactions. Further, the Capital Market Law grants special purpose vehicles formed by originators for the purpose of issuing sukuk exemption from payment of taxes and fees imposed by all Oman government bodies; hence, they are exempt from payment of, inter alia, income and withholding taxes.

IV INSOLVENCY

There are no insolvency proceedings specific to Islamic finance in Oman. Both conventional and shariah-compliant commercial companies are subject to the bankruptcy provisions in RD No. 55/1990 (the Commercial Law). Bankruptcy is declared by the commercial court either suo motu, at the request of an insolvent commercial company or based on a claim filed by the creditors of an insolvent commercial company. As of the date of adjudication of bankruptcy, the bankrupt debtor would relinquish all rights and powers to a court-appointed trustee in bankruptcy for the latter to manage the bankrupt entity's assets, including those acquired or accrued post-declaration of bankruptcy, if any. A bankrupt may not dispose of any of its assets, nor make or receive any payment unless the sale or receipt of payment is for a bona fide commercial purpose. Upon the declaration of bankruptcy of a debtor, no suit may be brought against it or be proceeded with, except in specific instances enumerated by the Commercial Law.

With the issuance of RD No. 53/2019, a new Bankruptcy Law has been introduced to replace the insolvency provisions contained in the Commercial Law. The new Bankruptcy Law sets out the procedures for preventive composition, restructuring and bankruptcy. It should be noted that the new law specifically exempts all entities licensed by the CBO and insurance companies from its application, which suggests a new regulation may be issued by the regulators of these entities specifically in relation to applicable bankruptcy and insolvency procedures. The new law is scheduled to come into force within one year of its promulgation date.

V JUDICIAL FRAMEWORK

i Courts

Under the court system in Oman, as provided for by RD No. 90/1999, the Primary Court (Commercial Circuit) (the Primary Commercial Court) is the only body in Oman with primary jurisdiction in relation to commercial disputes (whether or not they relate to Islamic finance issues of a commercial nature); these are subject to appeals before the Appellate Court (Commercial Circuit) and the Supreme Court of Oman. Prior to the establishment of the Primary Commercial Court, the Commercial Court and the Authority for Settlement of Commercial Disputes were the judicial bodies with exclusive jurisdiction to adjudicate upon commercial matters. Although there is no court dedicated exclusively to Islamic finance disputes, there is a Shariah Circuit within the Primary Court, which adjudicates in personal affairs matters such as marriage, divorce and inheritance. Similarly to the judgments of the Primary Commercial Court, the judgments rendered by the Shariah Circuit of the Primary Court are appealable before the Appellate Court (Shariah Circuit) and the Supreme Court.

Parties to Islamic finance-related agreements are free to agree to refer disputes to an arbitral tribunal and to specify the law governing their transaction and the arbitration rules governing arbitral proceedings. An Omani court would be required to dismiss a suit raised before it to adjudicate on a dispute in respect of which an arbitration agreement exists, provided the defendant in the suit were to plead for its dismissal on the basis of the parties having agreed on arbitration as the dispute settlement mechanism.

ii Cases

Because the legal and regulatory framework of Islamic finance is a relatively recent introduction, as at the time of writing there have been only a few cases that shed light on how the Omani courts perceive disputes relating to Islamic finance. In a judgment passed by the Supreme Court on appeal No. 83/2003, heard on 3 April 2004, the Supreme Court rejected the characterisation of an investment agreement as a mudarabah agreement by the Appellate Court. The Supreme Court stated that the principles of Islamic law constitute the basis on which the Court adjudicates on transactions. The Supreme Court referred to Islamic law and stated that mudarabah consists of the offering of funds by one party against the performance of an activity by the party receiving the funds; the offering and performance are based on the principle of sharing profits between the parties and, in the event of occurrence of losses, the person offering the capital would assume the losses in the absence of transgression or breach by the person investing the money.

The Supreme Court has further provided that profit should not take the form of interest as typically offered by banks; otherwise the mudarabah would be invalid. The Supreme Court referred to the contract provisions in question and provided that the presence of a clause according to which the person offering the capital was entitled to a profit share of no less than 5 per cent corrupted the mudarabah and rendered it invalid. The Supreme Court argued that mudarabah is an investment endeavour susceptible to both achievement of profits and incurrence of losses; thus any undertaking made by the mudarib to reimburse the person offering the capital regardless of whether or not losses had occurred would result in the mudarabah becoming invalid. The Court stated that should the mudarabah become invalid under Islamic law, the capital initially offered to the mudarib should be reimbursed by the latter to the counterparty; however, because of the invalidity of the mudarabah agreement, the counterparty shall not be entitled to receive any profits achieved by the investment project.

In a further judgment passed by the Supreme Court, on appeal No. 187/2003, heard on 31 March 2004, the court disregarded the appellant's characterisation of the disputed agreement (titled as an 'investment agreement') as a mudarabah agreement on the basis of Articles 4 and 5 of the Commercial Law, which provide that Islamic law (although a source of law that a judge may refer to when adjudicating on commercial disputes) should be applied only in the absence of relevant contractual provisions and after exhaustion of other sources of law relevant to the subject matter of the dispute. The Supreme Court distinguished between riba interest and compensatory interest, by stating that compensatory interest is determined by the Minister of Commerce and Industry on the basis of the Commercial Law, which provides that an interest rate may be charged on commercial debts within the limits specified by the MOCI in coordination with the Oman Chamber of Commerce and Industry. Thus, the Supreme Court concluded that the agreement in question, although not a mudarabah, constituted a valid investment agreement, and not in breach of law.

VI OUTLOOK

The accelerated pace of legislative reform and developments in the area of Islamic finance over the past few years are a testimony to the Sultanate's goal to become a regional hub for the Islamic finance industry. This trend, although partially motivated by the country's programme for economic diversification, is also based on the government's view that Islamic finance remains an untapped source for investment opportunities and support for the country's economy, which has been affected by the global economic crisis and the crash in oil prices. The government's multiple sukuk issuances, with an aggregate value in excess of several billion dollars, are testament to the increasing interest in Islamic finance as an attractive alternative to its conventional counterpart. Additionally, Islamic banking's share of the market has been steadily increasing and rose to 12.6 per cent in June 2018, thanks to the government's encouragement and public interest.

The CBO has been keen on spreading awareness of Islamic finance and encouraging the industry by promising to launch a shariah-compliant version of the Banking Deposits Insurance Scheme, and to offer Islamic liquidity management solutions to the Islamic banking industry. The CBO has also been looking into ways to implement fintech in the Islamic banking sector, and to encourage conventional banks to convert their Islamic windows into fully fledged Islamic banks. In addition, the CMA has been at the forefront of introducing regulations to provide for a robust governance framework for Islamic finance in Oman. The introduction of the Sukuk Regulations, the Takaful Insurance Law and the REIT Regulations has certainly spurred consumer confidence and growth of the Omani Islamic finance industry. In light of this, we anticipate that in the near future, further reforms will be implemented in relation to Islamic banking, in particular to modernise this sector and take it to the next level, allowing for it to become an even stronger competitor to conventional financing.


Footnotes

1 Mansoor J Malik is a senior partner, Asad Qayyum is a partner and Hussein Azmy is an associate at Al Busaidy, Mansoor Jamal and Co.

3 See Section 4.1.3 of the Islamic banking regulatory framework.