The Laws And Regulations Governing Islamic Finance In Oman

• Published date: 15 December 2021
• Subject Matter: Finance and Banking, Financial Services, Islamic Finance
• Law Firm: BSA Ahmad Bin Hezeem & Associates LLP
• Author: Mr Arsalan Tariq and Reem Al Habsi

The following Q&A, originally published for Lexis Middle East, answers important questions regarding the laws and regulations governing Islamic Finance in Oman.

1. What types of Islamic finance products are most commonly used in Oman and how extensive is the uptake?

The most used Islamic finance products, for provide financing by Islamic banks in Oman are Murabaha, Diminishing Musharaka and Wakala. It is expected that with the support of the government's policies, the Islamic finance industry in Oman will continue to expand and grow in all aspects in the coming years, considering the development of Islamic finance is still in its early stages in Oman.

2. Is there any specific legislation in Oman covering Islamic finance and/or Islamic funds?

The Islamic finance sector in Oman is controlled by the following laws and regulations:

• The Banking Law ('BL') promulgated by a Royal Decree no. (114/2000) and its amendments.
• The Islamic Banking Law Regulatory Framework ('IBRF') issued on the 18th of December 2012 by the Central Bank of Oman has provided licensing rules and guidance applicable to banks and Islamic Windows regulated and supervised by the Central Bank of Oman ('CBO') and Sharia governance framework, to ensure Sharia compliance in Islamic banking operations of Islamic banking institutions in Oman;
• The circulars issued by the CBO Board of Governors;
• Decision (3/2016) issued by the Capital Market Authority regarding the Executive Regulation of the issuance of sukuks.

3. Does any of the more general legislation covering banking, finance, and insurance cover Islamic finance? If so which laws - and what are the main areas, they cover?

In addition to the laws mentioned above, Takaful Insurance Law promulgated by Royal Decree no. (11/2016) and its amendments regulates the takaful (Islamic insurance) activities in accordance with the provisions of Shari'a in Oman.

4. Do any of the onshore financial regulators issue specific regulation covering Islamic finance and/or Islamic funds?

Yes, the CBO and Capital Markets Authority, Oman, issues circulars periodically to clarify the laws in order to guide and regulate the entities intending to provide Islamic finance or establish Islamic Funds.

5. Are conventional banks, financial service, or insurance providers able to have Islamic finance divisions or provide Islamic finance products or can this only be done by specialist Islamic finance institutions? If they can, what additional steps are they required to take to gain...