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Saturday, August 23, 2014  

Higher demand to boost Islamic banking growth
Anita Joseph

MUSCAT The Islamic banking in Oman is demand-led and is expected to grow fast on the back of higher demand and positive sentiments, according to Richard Thomas, chief executive officer of Gatehouse Bank, a Sharia-compliant investment bank based in London.

“Oman’s foray into Islamic banking is based on strong fundamentals and sound regulations. The government is extremely proactive and keen to utilise unproductive money into fruitful enterprises. They have a very mature outlook on Islamic banking, and that is music to the ears,” he said.

According to Thomas, who is the chairman of the UK Islamic Finance Secretariat at TheCityUK, the main challenge for Islamic banks is liquidity transformation.

“Islamic banks gather a lot of short-term retail deposits. How to turn them into long-term project-financing is the huge challenge confronting them,” he added.

Meeting the demand for Islamic banks is another big challenge, Thomas said.

“If Islamic banks don’t rise to the occasion and cannot meet demand, then customers can be dissatisfied.”

Another challenge, he said, is about how well equipped the various service providers are, to provide Islamic banking services which are more holistic than conventional banking.

“Oman however, seems to have recognised these problems and are doing everything they can to fix them,” he said.

According to him, very few countries in the world are fully equipped to take on Islamic banking.

“Globally speaking, Islamic banking is brand new, say around 30 years. And it is hard to be completely ready for it in such a short time. Oman, like other countries, is still learning and beginning to take the first few steps,” Thomas said.

“In today’s economic climate, Sharia-compliant solutions and Islamic economics are more and more relevant. Oman has a strong opportunity of growth in this area and as a UK Islamic banks we are keen to co-operate. Equally, international investors are becoming increasingly focused on wealth preservation, and sourcing income producing properties in mature and stable markets is key. London is already establishing its position as a strong home for international investment, and has a reputation as a hub for Islamic Finance,” he added.

According to him, Islamic banking in the UK is not demand-led. “Over there, the Islamic banking sector is led by inspired individuals, but the man on the street is not very aware of it. People are a little wary about stepping into it, and need a lot of persuasion to do so. However, the government there is very supportive of it because it needs to promote financial inclusion, and so it will succeed as a retail product in the long term.” 

The future of Islamic banking across the world looks good, he added.

“At a time when conventional banking is at its lowest level of morale or optimism, Islamic finance has a chance to show what it can, especially since by now it has the maturity to meet challenges. Also, the Islamic economic model is a superior one. I’ve seen Islamic finance become a powerful factor across the GCC, and there’s no reason why it should not be the same here in Oman. Once trust is built, success will follow.”

Thomas has over 30 years’ experience working with Shariah compliant financial services.

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