MUSCAT: Continuing the fast-paced growth in Oman’s Islamic banking industry, the total assets of Islamic banks and windows reached to RO2bn as of September 2015.

The share of Islamic banking in the sultanate’s total banking assets rose to 6.5 per cent in September 2015, according to latest statistics released by the Central Bank of Oman (CBO).

Total assets of the Islamic banks and windows recorded a robust growth of 53 per cent in September this year compared to total assets of RO1.28bn a year ago. Consolidated financing of the sector jumped to RO1.5bn from RO904mn a year ago, registering a growth of 66 per cent year-on-year. Financing to the private sector accounted for RO1.48bn of total Islamic financing.

Global credit ratings agency Moody’s recently said Islamic banking assets are expected to achieve between 10-12 percent market share in Oman’s banking sector within next two years.

‘We expect Islamic banking assets in Oman to account for 10 to 12 per cent of the market within next two years, both through the conversion of customers from conventional to Islamic banking services and through new lending’, Moody’s said in its Oman banking system outlook last week. On the other hand, total deposits at Islamic banks and windows surged by 210 per cent to RO1.33bn from RO430mn a year ago.

While private sector deposits of RO682mn accounted for 51 per cent of total Islamic banking deposits, government deposits at Islamic banks and windows were RO526mn or 39 per cent of total deposits. Deposits from public enterprises were at RO124mn.

Moody’s said that Oman’s first sovereign sukuk, which raised RO250mn recently, is an important step towards developing Islamic finance industry in the country. The sukuk offering and prospects for future issuances will likely provide a benchmark for the pricing of Islamic banks’ financing as well as potential private-sector issuance of Islamic instruments, it said.

‘In addition, sovereign Shari’ah-compliant issuances will provide Islamic banks with much needed high-quality liquidity management instruments given the scarcity of non-interest bearing money market instruments’,Moody’s said in its report.

An IMF working paper released last week said that the liquidity management has been a long-standing concern in the Islamic finance industry in the GCC as there is a general lack of Shariah-complaint instruments that can serve as high-quality short-term liquid assets.