1. Islamic Banking ‘The New Form of Banking in Oman’

2. Table of Contents Concept of Islamic Banking
How Islamic Banking differs?
Growth Factors for Islamic banking
Islamic banking windows
Way Forward

3. How Islamic Banking Differs?

4. What is Riba in Holly Quran?

5. Key Differences with Conventional Banking.
Asset backed
Transactions must typically be backed by assets. No returns on lending of cash
Interest free
Payment / receipt of interest is prohibited. Profit is encouraged
Restricted
investments
Investments, or the tangible assets backing investment instruments, should not belong to prohibited industries (e.g. alcohol)
Extreme uncertainty
Extreme uncertainty and/or lack of transparency (Gharar) is prohibited (e.g. in options, futures and other derivatives)
Risk-sharing
Based on the principle of assuming risk to obtain rewards to foster justice in transactions; risk sharing is fine but risk transfer is not

6. Asset Products Structures
Asset Side Products
Home Finance
Dim Musharika
Ijara
Murabaha
Istisna
Car Finance
Personal Finance
Tawarruq
Credit Card
Bai ul Ina
Ujra
Short Term Fin
Salam
Long Term Fin
Musharika
Islamic products can be structured using different underlying contracts vis-à-vis risk implications, regulatory directions, market dynamics and sharia advisor.

7. Liabilities Products Structures
Liabilities /Fee Products
Business A/c
Qarz
Wadiah
Saving A/c
Modariba
Wakala
Tawarruq
Fixed Deposits
Bancatakaful
Mutual Funds
Sukuks
Ijara
Musharika
Salam
Istisna

8. Potential of Islamic Banking

9. Global Industry Highlights
Market size
Estimated over US$ 1 trillion in 2011
Geographic reach
Presence in over 75 countries
Growth rate
Approx. 20% over the past decade
Expected growth rate
15-20% p.a. in the foreseeable future
Industry players
Over 450 Islamic financial institutions worldwide, another likely to come into existence in the next 10 years
Source: Industry reports

10. Islamic banking Potential in Oman
GCC Islamic banking represents 26% of total market size (EnY)
IFIs will have 60% market share in GCC by 2015 (IFSB)
Islamic banking assets in Oman will be 8-10% over next few years (Oliver Wyman)
Given GCC fact sheet, Islamic banking assets in Oman could be $10 bio
59% very interested and 26% quite interested (IFAAS)
Source : S& P report

11. Total portfolio is over RO 75 Mio
Meethaq home finance
Started operations in 2008
Total portfolio is over RO 75 Mio
Total Meethaq customers are over 2000
Majority of the customers are first time borrowers
Pioneer of Islamic Banking in Oman

12. Drivers for Growth in Oman

13. Driver for Growth in Oman
Oil Revenues of GCC States
Window’s business model
Muslim Population Growth
Islamic Finance Growth
Training / Awareness
Regulatory Reforms/ Legal Framework
Sharia governance structure
Government Support
Legal System/ Accounting Standards

14. Islamic banking Windows

15. Pros & Cons of Window Windows Operations ADVANTAGES
Easy head- start in new market
Leverage on existing infrastructure
Instant tweaking to gear up IT systems
Cost to do the business is lower
Value added services to customers
DISADVANTAGES
Public perception – too close to parent
CHALLENGES
Need public awareness about window’s operations
Windows Operations

16. Funds Segregation Fundamentals System and Controls
Sharia Framework
IT System
Separate Book
Funds Segregation Policies
CBO Framework
Funds Segregation Assurance
IIFM, AAOIFI & IFSB
Business Ethics
Corporate Governance
ALM Guidelines
External/ Regulator’s Audit
Sharia Inspection

17. Window’s Governance Structure
Separate capital allocation
Stand alone Islamic branches (vs. Islamic counters in conventional branches)
Separate books of accounts
Separate IT system
Reporting standard (AAOIFI vs. IFRS with additional disclosures)
Organization structure
Independent Sharia Board

18. Way forward