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7/28/2019 OER-APRIL-Cover Story Ilamic Banking
1/15
7/28/2019 OER-APRIL-Cover Story Ilamic Banking
2/1582 April 2013
Pised fr aquanum leapDespite being at its embryonic stage, Islamic nance is predicted to have thepotential to redraw the banking landscape of the Sultanate in the years tocome. Being the rst full-edged Islamic bank in the country, Bank Nizwa isapparently in the vanguard of Omans historic tryst with faith-based nance.Its CEO Dr Jamil El Jaroudi exudes condence that the bank is geared up toassume this challenging responsibility, in an interview with Muhammed Nae
d Jaml El Jaou, cEO, Bak nzwa
It was only a couple of months ago that
Bank Nizwa started its commercial
operation as the rst full-edged
Islamic bank in the Sultanate. How is
the initial response from the market?
The response has been very
enthusiastic as we expected. We
receive a lot of people who come to
inquire about our services and open
accounts with us; and they are very
much impressed by the manner andthe promptness and speed with which
we can open an account for them.
We promise that if you are eligible
we can open your account, get your
check book and ATM card before
you leave the branch. But as the
number of the visitors has increased
steadily, and as those who come
with a volley of questions about our
services and facilities have required
more time, we have arranged some
of our staff exclusively to handle such
queries, so that others can complete
the process without any delay.
What are the Islamic banking products
and services that Bank Nizwa offers
right now? And what sharia contracts/
tools does each of them apply?
Basically, people expect us, as a bank,
to offer current accounts and saving
accounts; and many of them want it
along with additional facilities. Today
we already offer these services, and
we allow our current account holders
to use the ATMs of all other banks in
COVERSTORY-ISLAMIC BANKS
the country at our expense. It means
all ATMs in the Sultanate are ipso
facto Bank Nizwas ATMs. As a new
bank, we cannot set up ATMs across
the length and breadth of the country
overnight and therefore we had to nd
out a mechanism to serve all people
who bank with us. For instance,
people who live 500 kilometres away
from Muscat cannot wait to open an
account with Bank Nizwa till we set
up an ATM machine there. We also
offer saving accounts, personal nance,
auto nance and home nance.
7/28/2019 OER-APRIL-Cover Story Ilamic Banking
3/15
In home nance, the sharia model
we started with is Ijarah Muntahiyah
Bittamlik (a sharia leasing contract
whereby at the end of the contract
the ownership is transferred from
the lessor to the lessee). This is verypractical and more effective at this
stage. But sooner we are looking to
introduce other facilities such Istisna
where people can come with a design
in their mind and ask us to build a
house of their willing wherever they
want, instead of buying an already
built house. We build it and lease it
for them with an option to own it later.
Istinsa is the Islamic tool for what you
call project nance in the conventional
stream. We can also apply other
models depending on the requirementsof our clients in the future, whether
it be setting up the headquarters for
a company or building its warehouse
or manufacturing facility. Apart
from Murabaha, Ijara and Istinsna,
we will also be doing in the future
equity participation, either through
direct ownership or Mudharaba
participation wherein the investors
who give us the money would be called
Rabbul Mal (owner) while we will
be the Mudharib (those who deploy
money and invest it for them).
What about your ATM and branch
network? Where else do you want
to start branches this year?
Right now we have three branches
located in Muscat, Sohar and Nizwa.
But by the end of 2013 we plan to
open other ve branches, to end
the year with eight branches across
the country. And as I mentioned
earlier, all ATMs in the Sultanate
will be part of our network.
You have a huge paid up capital of
RO150mn. What is your comment on
the the recent CBO relaxation for Bank
Nizwa in overseas investment ceiling?
The Central Bank of Oman allowed us
to do that because there are not many
Islamic instruments available in the
Sultanate where we can invest our
money. But the concession the CBO
extended to us is only for a stipulated
period and once it is over we will
come under the normal regulation
as any other bank in the country.
It is obvious that the concession
was on the basis of our request.
Islamic nance is predicted to make
rapid headway in the country with its
asset base reaching RO1.5bn by theend of 2013. How prepared are you
for this as you have to compete against
numerous windows of conventional
players who have already started
operation?
It might be too early to talk about
competition, actually. We have not
run into each other so far. There
is enough room for everybody. We
kept saying form a practical point of
view that we welcome competition
because rst of all it helps the clients.
On the other hand, it helps us tocreate awareness rather than one
company doing it alone. And thirdly,
we exchange with them products.
Today if they have problem of liquidity,
I can help them out; or tomorrow if
we have the problem they can help
us. The monopoly of one single bank
does not work. With more players we
will have a vibrant Islamic banking
market. But still there needs to be a
limit on how much competition you
can bring to the Sultanate at this stage
and there should not be an oversupplyof institutions. And I think the Central
Bank of Oman is the best judge to
decide when to stop giving licenses.
Islamic nance is still in the edgling
state in Oman. What are the major
challenges you confront at this stage?
The biggest challenge is to create
awareness among people about Islamic
nance. People have to understand
what Islamic nance is, rather than
saying I love therefore I want. They
have to understand the importance of
Islamic nance and what it can bring to
the economy and that takes time. This
is one of the biggest challenges because
people might be confused by inaccurate
information and descriptions
presented by some for marketing
purposes. People want to understand
the fundamental difference between
the new and conventional banks.
There are many things that they still
want to know. We are generating
awareness through various types of
forums, seminars and conferences.
We are working with universities by
delivering lectures and presentations
in order to explain to the students who
are going to be the future operators
in the market. We need to reach out
to more youngsters who constitute ahuge chunk of Omans population. We
also make use of media as a channel
to send our message across. It needs to
be a collective effort between us, the
policy makers, education institutions
etc. to ensure that the message
comes from more than one source.
The second challenge is reaching
out to as many people and areas as
possible in the Sultanate because
everybody in Oman wants Islamic
banking. But we have to walk beforewe run and therefore we gradually
want to accommodate everybody
aspiring to do business with us. We
have to explore more innovative
and creative ways to reach out to
everybody. One solution is to open
new branches but it will take time to
open a physical branch by recruiting
new employees as it involves getting
them relieved from their previous
employers and giving them proper
training. The third challenge is that
peoples expectations are high andour ability to expand is controlled.
It is not as easy as being a bank and
turning it into an Islamic one.
How do you manage to nd
experienced Islamic bankers?
Although we have very good bankers in
Oman, it is dicult to get experienced
Islamic banking employees. We
are trying to bring Omanis who are
working outside the country in Islamic
banks such as Saudi Arabia, UAE,
Bahrain and Qatar. In addition, all
our employees have to go through
an intensive training programme.
Even when we open a new branch
we do training to the new comers for
three weeks from 8am to 5 pm. In
addition, every month they undergo a
refreshing course where we have our
Sharia experts interacting with them.
We also get our feedback from our
call centre about the most frequented
questions asked by people. We train
our people to give everybody the same
answer to the same questions.
7/28/2019 OER-APRIL-Cover Story Ilamic Banking
4/1586 April 2013
building n a
srng legacyBeing part of a strong brand of Bank Muscats stature has beenimmensely helpful for Meethaq to put itself on strong footing in a highlycompetitive Islamic banking market, says Sulaiman Al Harthy, GroupGeneral Manager- Islamic Banking, Bank Muscat. An OER interview
How is the initial response
to Meethaq?
The response has been quite exciting
and the number of inquiries hasbeen more than what we expected
so that we are forced to double
the number of the staff. There are
two types of customers: those who
come after making up their mind
and those who initially come just
to inquire and then come back to
us after going to other banks and
understanding what distinguishes
our products and services.
What are the Islamic banking
products and services Meethaq
offers right now? And what sharia
nance models they apply?
For the time being we offer current
account, savings accounts, home
nance, and auto nance. We have
also launched corporate nancing
and have already started nancing
a number of projects of which the
biggest one accounts for about
RO12mn. And a number of bigger
projects are in the pipeline. In general,
we apply three sharia contracts.
For project nance, we primarily
use Musharaka and Ijara while for
auto nance we use Murabaha, as
most of the banks do because it is
easier. We are using Murabaha forsavings accounts and Qardhul Hasan
for current accounts. However,
we have not yet started the more
complicated contracts such as
Istisna and Salam etc. We have a lot
of products in the pipelines which
will be out in a few months time.
Where else in Oman do you want to
open branches of Meethaq this year?
We have planned to open seven
branches this year. It looks a bit
slower than we expected, but
hopefully we will have seven
branches in Muscat and other citiestowards the end of this year.
Could Meethaq leverage Bank
Muscats existing brand image
in the market to address new
Islamic banking customers?
The Central Banks regulation
requires that the window should
remain as a bank within a bank,
need to have a separate balance
sheet and separate loss and prot
account. We do a lot of awareness
and education. Recently, we trained
about 200-300 customers and had
a one week training forum in
Nizwa. We were doing this even
before we got the license. We
have explained to people that how
different the Islamic banks are from
the conventional banks and how a
window can operate as a window
and still be Islamic even though the
parent bank is riba-based. Some of
our existing customers are shifting
to Meethaq. Earlier the existing
customers did not have a choice;
The Central Bank of
Omans regulation
requires that the window
should remain as a bank
within a bank
COVERSTORY-ISLAMIC BANKS
7/28/2019 OER-APRIL-Cover Story Ilamic Banking
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but now they have a choice of either
staying with Bank Muscat or going
to another Islamic bank. So they
prefer to stay with Bank Muscat.
We dont hide our identity, contraryto some other Islamic windows who
dont use their parent companys logos
and where if you walk in it will be very
dicult to make out their real identity-
whether they are new banks or
whether they are part of an established
entity. But we are more transparent on
this. Everybody knows that Meethaq
is attached to Bank Muscat and a
window of Bank Muscat, so why do
we hide it? Bank Muscat is a very
strong brand and if you are associated
with a bigger brand, its good.
How prepared are you to compete
against full-edged Islamic banks,
especially when there are concerns
about the feasibility of conventional
banks offering Islamic services
through window operations?
The competition is intense. Now,
every client you speak to, especially
the corporate clients, are talking to
other banks as well. After all, what
matters to them is the pricing- the cost
of nancing. So it is very dicult. Onone hand, the window operations can
take advantage of the parent banks
support functions such as HR, IT
etc. But on the other hand, this can
also be very dicult because people
with the conventional bank used to
do banking in a given way and now
they have to do in a different way.
So we have got a lot of challenges in
terms of convincing them that they
are different and they have to be dealt
differently. Money has to be segregated;
there could not be the commingling of
the funds. As far as full-edged banks
are concerned their entire operation
is focused on one thing. However we
are giving training to them. Right now,
ve of my staff members are abroad
undergoing on-job training in a bank
in Bahrain to raise their knowledge,
ability and condence. So they can
understand how to do it here in Oman.
They may be more skilled than the
Bahrainis they work with, but we sent
them to get more condence.sulama Al hat, goup geeal Maae- ilam Bak, Bak Muat
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on a slid fingNational Bank of Omans Muzn Islamic Banking plans to open sevenmore branches across the Sultanate this year. Muzn is equippedwith a robust system and qualied staff to offer a broad spectrumof sharia-compliant products and services, says Ahmed Al-Musalmi,Deputy Chief Executive Ocer, National Bank of Oman
Ame Al-Mualm, deput cef Exeutve Offe, natoal Bak of Oma
COVERSTORY-ISLAMIC BANKS
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How is the initial response for Muzn?
The initial response from the market
is remarkable. We were amazed with
the positive response from the public
and the high demand for sharia-
compliant products. Since Muzn was
launched, we have been receiving
lots of customers opening accounts
with Muzn and conducting Islamic
transactions, be it placing of funds or
nancing requirements. We stronglybelieve that our market share of
Islamic banking will be very high
compared to our competitors, noting
the high demand for the services and
the products offered by Muzn which
are by far the best in the market.
What are the Islamic banking
products and services Muzn offers
right now? And what sharia
nance models they apply?
Muzn Islamic Banking caters for the
retail and corporate requirementsand our products cover the needs
on both the assets and the liabilities
sides, from Mudaraba accounts for
retail saving accounts; Wakala for
corporate and retail deposits; and
Flexi wakala for call accounts. Also,
the asset side includes Ijara for home
nance, home construction nance
and term nancing; Murabaha
for cars and assets nancing as
well as trade nance services.
What about your ATM and
branch network? Where else
in Oman do you want to open
branches of Muzn this year?
Currently we have one branch in
Muscat. However, our plan is that we
will cover the entire Oman by the end
of 2013 as Muzn will open seven more
branches in all the regions of Oman to
cover customers needs. We are facing
increasing customer demand from
all the regions requesting for Muzn
services which will drive us to speed
up the process of opening more Muzn
branches to fulll our customers needs
and expand our reach. Currently all
Muzn customers can use the National
Bank of Oman ATMs free of charge,
which reects Muzns commitments
to its customers and community.
Islamic nance is predicted to
achieve an asset base of RO1.5bnby the end of 2013. How prepared
are you for this as you have to
compete against full-edged Islamic
banks with huge paid-up capital?
Muzn is the rst Islamic banking
window to open its doors to the
public. It is also the rst Islamic
bank to register with the Ministry of
Housing and the rst to offer Ijara
services to the customers, which
gives a clear idea of how Muzn is well
prepared. We are well ahead in the
market with our dedicated and welltrained Islamic banking team and
our product suite which is geared up
to cover all market requirements.
Could Muzn leverage the National
Bank of Omans existing brand
image in the market to address
new Islamic banking customers?
Muzn is supported by the National
Bank of Oman from an operational
perspective; being the parent company
of Muzn, National Bank of Oman
provides special treatment, services
and rates to its customers to promote
Islamic banking within the group.
There were concerns about the
feasibility of conventional banks
offering Islamic services through
window operations. What arethe measures you have taken
to alleviate such concerns?
Muzn is operating with the concept
of an Islamic bank within a bank,
with a separate balance sheet,
separate paid-up capital to support
its operations, separate IT system and
separate core banking system. This
will allow Muzn to offer its services
in the market as a full-edged Islamic
bank. Our services with National Bank
of Oman are mainly concentrated
in the eld of operational support.
Muzn sharia supervisory board
comprises three of the best scholars
in the Islamic banking eld in the
world with extensive experience in this
eld. They are Sheikh Dr Mohamed
bin Ali Al Qari, chairman of Muzns
Sharia Supervisory Board (SSB) and
board member in many Islamic
organisations. He is also a sharia
professor in king Abdulaziz University
in Saudi Arabia as well as penned so
many articles on Islamic banking.
We also have on board Sheikh Dr
Mohamed Daud Baker, chairman of the
Central Sharia Advisory Council of the
Central Bank of Malaysia, Securities
Commission of Malaysia, and Labuan
Financial Services Authority as well
as many other Islamic organisations,
and Sheikh Khalfan Al-Esry, member
of Muzn SSB and a well-known Sharia
scholar in Oman with solid experience
and knowledge of Islamic banking.
Muzn is the first Islamic
banking window to open
its doors to the public. It
is also the first Islamic
bank to register with the
Ministry of Housing
7/28/2019 OER-APRIL-Cover Story Ilamic Banking
8/1590 April 2013
Spreading is neAhlibank started the operation of its Islamic banking window withve branches, and the sixth one is expected to open in April. AbdullahAl Jabri, Deputy General Manager, Head of Al Hilal Islamic BankingServices, Ahlibank, is optimistic that the crescent moon, which Al Hilalis named after symbolising the start of a new era of Islamic banking,will mutate into a full moon as the bank goes along. An OER interview
Can you explain about the
branch network of Al Hilal
Islamic banking Services?
Al Hilal started its operation with
ve branches in Samail, Bahla,
Rustaq, Saham and Muscat from
day one. The fact that we launched
the operation with ve full-edged
branches offering all Islamic
products shows our readiness to
offer Islamic banking services across
the Sultanate. In addition, our sixth
branch is coming up very soon in
Salalah. The Salalah branch will
be operational before the end of
April. Opening new branches will
depend on the market requirements
and customer demand. We also
think about converting some of
our existing branches to the new
mould if there is a lot of demand for
Islamic services. All our branches
are equipped with independent
ATMS and all our customers can use
both the conventional and Islamic
ATMs of Ahli bank, although we
have segregated the systems; and
since we are part of Oman Net
our customers can use all other
ATMs in the country as well.
Abulla Al Jab, deput geeal Maae, hea of Al hlal ilam Bak seve, Albak
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While all the Islamic banks and
windows started their businesses
in Muscat why did you go to Samail
for the opening ceremony?
We opened ve branches in the veryrst day of operation, but we did the
opening ceremony in Samail as a
symbolic gesture because the region
is the cradle of Islamic civilisation
in the country. The rst Omani to
accept Islam, Mazin bin Adhouba,
was from Samail and the rst ever
mosque in the country was set up in
the same place. Even the name of our
Islamic window Al Hilal denotes the
crescent moon in Islamic tradition
symbolising the start of a new era of
banking in the country and we areoptimistic that the crescent moon
will mutate into a full moon brining
more brightness as we go along.
How are your Islamic banking
products being accepted
across the branches?
The initial response has been great.
Our Islamic products have been
accepted very well and the demand
is steadily on rise. This prompts
us to open up more branches and
expand our networks to more areasin the country. Our initial strategy
is to tap into the largest segment of
new customers looking for faith-
based banking services followed by
converting our existing customers
who are willing to migrate to the
Islamic mould. Now, the demand
is very high from both sides.
Can you explain about the products
and services Al Hilal offers right now?
The products we offer are almost
similar in nature to what other Islamic
banks and windows offer. But the
difference lies in the way we offer
them. We have all the products on
both sides of asset and liability. We
have auto nancing, home nancing
and personal nancing for buying
goods and materials. On the liability
side, we have both savings and current
accounts. All our branches are fully
equipped for serving the customers
with dedicated staff which include
our direct sell team who go out to
visit the customers. We also have our
independent ATMs and very soon we
will be introducing our Islamic credit
card facility. We also issue checkbooks
and we are going to introduce
internet banking and SMS servicesvery soon. Most importantly, we are
also going to launch our exclusive
investment fund, called Islamic MENA
fund, which has been approved
recently by the regulators. Its the rst
of its kind Islamic fund in the country.
Islamic nance is predicted to
achieve an asset base of RO1.5bn
by the end of 2013. How prepared
are you for this as you have to
compete against full-edged Islamic
banks with huge paid-up capital?We are placed very strong compared
other window operators in the
country because we have the largest
Islamic banking networks spread
across the length and breadth of the
country. We always position ourselves
to be the leader of the Islamic banking
services and this will continue. What
distinguishes us is that we did not
have a soft operation nor we started
with one or two products. We started
with the full range of products across
all our ve branches and with thelaunch of Salalah branch we will be
the only Islamic operator with six full-
edged branches in the rst quarter.
Could Al Hilal leverage Ahlibanks
existing brand image in the
market to address the new target
Islamic banking customers?
We are under the umbrella of
Ahlibank, the fastest growing bank
in the country. And now Al Hilal has
emerged as the fastest growing Islamic
window in terms of branch network,
the products offered, expertise and
technical knowhow. In addition, we
are the rst bank to introduce Islamiccore banking system. In a short span
of two months we have shown all the
signs of growing fast like Ahlibank.
There were concerns about the
feasibility of conventional banks
offering Islamic services through
window operations. What are
the measures you have taken
to alleviate such concerns?
One of the biggest challenges is to
create awareness about Islamic
banking and to make peopleunderstand the differences between
our conventional and Islamic
operations. As an Islamic window,
we ensure the segregation through
fully independent branches,
dedicated capital, sharia auditing,
sharia supervisory board giving the
approval to all kinds of products and
services, dedicated ATM services etc.
His Majesty Sultan Qaboos bin Saids
instructions to launch Islamic banking
came a year back and from that day upuntil now, we have spent all our efforts
to educate the public about Islamic
banking through seminars. I think we
have attained a good level of knowledge
on the part of the public and our staff.
But we need to have more educational
sessions with customers because the
more they understand the concept, the
easier will be for us to provide them
with the most suitable product. The key
is to explain the differences between
conventional and Islamic banking.
They should be aware that although
the results may be the same, the
documentation, the agreement and the
process itself are completely different.
We have done a lot of awareness
campaigns in these regions which were
led by our sharia scholars and experts
from the oce of the Grand Mufti.
Apart from our sharia scholars, we
also invited scholars from other banks,
because for Islamic banking to grow
in Oman, we require collective efforts
from everybody to create awareness of
Islamic banking among the public.
One of the biggest
challenges is to make
people understand the
differences between
conventional and Islamic
operations
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on an upswingBankDhofar forayed into Islamic banking by opening two branchesof its Islamic window Maisarah in Muscat and Salalah. Sohail Niazi,Chief Islamic Banking Ocer, Maisarah, talks about how the edglingIslamic banking industry is going to unfold in Oman and how equippedBankDhofar is to avail itself of this opportunity. An OER interview
How is the introduction of Islamic
nance going to affect Omans economy?
His Majestys decree to open up Islamic
banking has been very well receivedby the market and the people of
Oman. The country has been enjoying
a positive economic growth, while at
the same time its population has been
growing. In order for this economic
growth to be sustained, nancial
services and banking industry will
have to play an important role in the
overall economy. Islamic nance
within the broader nancial services
industry will contribute directly to
the economic growth by offering
choices and alternatives to consumers,small businesses, corporations and
government institutions alike. It will
ll the gap that existed before the
introduction of Islamic nance in Oman.
Could you talk about the results of
Bank Dhofars feasibility studies and
market plans ahead of your launch?
As part of our analysis we conducted
a comprehensive study of local and
regional markets with the help of a
leading consulting rm. We wanted
to assess the true demand for Islamic
banking products and services
and determine the role Maisarah,
BankDhofars Islamic window, can play
in meeting that demand. There were
two key themes that emerged from the
study that I would like to highlight: First,
BankDhofar has a very loyal customer
base and many of them showed keen
interest in Islamic banking in the wake
of Islamic nances introduction in
Oman. Secondly, the demographics and
trends of the market that will derive
demand for Islamic products are SMEssoal naz, cef ilam Bak Offe, Maaa, Bakdofa
COVERSTORY-ISLAMIC BANKS
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and young consumer segments. We at
Maisarah will ensure that we offer best
Islamic products and services that are in
line with what our customers require.
It is predicted that prospects arebright for Islamic banking as a viable
alternative to the conventional banks
especially in the aftermath of global
nancial crisis. Your comments:
Islamic nance is based on principles
of transparency, ethics, fairness
and sharing of risk and reward. The
global nancial crisis and dicult
economic environment that ensued has
highlighted a need for better governance
and alternative options. The Islamic
nance offers complementary and
alternative solutions to existing productsand services offered by conventional
nance. The tremendous growth
experienced by Islamic nance industry
over the last few years testies to its
acceptance as a viable complementary
and alternative option. A lot of market
participants are considering it as a
serious and viable option not only in
the Muslim countries but also in non-
Muslim countries, as evident in the
issuance of Islamic bonds (sukuks) by
some major international corporations
such as GE Capital and Nomura.
What are the Islamic banking
products and services that
Maisarah offers right now?
On retail side, we are offering saving,
checking and deposit accounts, priority
banking, home and auto nance
through our two branches in Muscat
and Salalah, We also have other
products in the pipeline. Similarly,
on corporate side, we have goods
murbaha and kafala products ready
to be offered to corporate clients soon,
along with host of other products to
be launched in the near future.
Where else do you want to open
branches of Maisarah this year?
Based on our comprehensive feasibility
study and market research, we have
started our operations right now in
Muscat (Azaiba) and in Salalah. We
selected Azaiba and Salalah after
looking at the demographics,
commercial environment and other
business factors. As far as the future
branches are concerned, we are
evaluating new locations in the country,
but we will strategically consider
customers expectations and market
demand. Any decision on launching a
future branch will be based on thesefactors. However we are open to
opportunities anywhere in the country
and are constantly keeping an eye
on the competition in the market.
How could Maisarah leverage Bank
Dhofars existing brand image in
the market to address new target
Islamic banking customers?
We have an advantage as the window
operation of an established conventional
bank, as opposed to a standalone
bank. We have a big network of clientswith long and deep relationships; we
can get their feedback, and based
on this feedback we can specically
address their needs. Our strategy is
to understand the true demand for
the products from the customers and
deliver exactly what they are looking
for. We are also talking to our existing
clients who have shown interest in
Islamic banking. We can also leverage
BankDhofars existing infrastructure,
technology, and market knowledge.
If you are a new bank you have tostart everything from the scratch
and your challenge will be bigger.
There were concerns about the
feasibility of conventional banks
offering Islamic services through
window operations. What are
the measures you have taken to
alleviate such concerns?
First of all this model is not a new
one, as it has been practiced in
many countries. But since its new in
Oman, the customer awareness and
education are very important. People
have to realize that Maisarah, the
Islamic window is a very distinct and
separate operation. We are part of alarger organisation, but we operate
a very segregated business; we have
a separate Islamic banking team,
separate premises, independent
accounting systems, policies and
procedures based on generally
accepted Islamic nance principles,
separate and independent sharia
board which supervises and oversees
the entire operation to ensure not
only that we are sharia-compliant but
also we are completely segregated
from the conventional businesses.That is the most important element
of segregation. We have to ensure
that segregation remains in place,
not only because it is sharia and
regulatory requirement, but is also
very important from customer
perception point of view. The
segregation is not physically a dicult
exercise; we have already managed
to hire very experienced professional
team with deep experience in Islamic
nance and set up a segregated
Islamic banking services business.
How prepared are you to compete
against another full-edged Islamic
bank and numerous windows of
conventional players?
We have a dedicated team working
hard to ensure that we come out with
the best offerings for our customers.
With BankDhofars aim to be the best
bank in the Gulf, we are focused on
ensuring that our Islamic division
Maisarah also will be the best in
Gulf. Under the supervision of Sharia
board, a separate brand for the Islamic
banking which will be operating from
a separate oce with a skilled team,
we will strive to meet the needs of our
customers and community. We are
going to achieve the vision of being
best in the Gulf, simply by providing
the best banking experience to our
clients, to create the best opportunities
for our employees, to establish the
best and responsible relationship with
our community and to deliver the best
results for our shareholders.
The tremendous growth
experienced by Islamic
finance industry testifies
to its acceptance as a
viable complementary
and alternative option
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12/1594 April 2013
Primed fr acinBank Sohar is all set to launch its Islamic window Sohar Islamicwith four branches coming up in Muscat, Batinah, Salalah andDakhiliya regions. Mohammad Haris, Head - Islamic Banking,talks about the preparations to launch a unique, authenticand reliable Islamic banking window. An OER interview
Bank Sohar has already announced
that Sohar Islamic will be its Islamic
banking window. When and where will
Sohar Islamic be starting its operationand what are your expectations?
We are in the nal stages of
preparations and plan to launch Soha
Islamic in a few weeks time. The
intention is to make sure that when
we launch the window, we are fully
prepared in terms of products, systems,
procedures and sharia-compliant
governance structure. Our expectations
are quite high for Sohar Islamic.
Islamic banking has done well in all
the countries it has been introduced
to so far. This is especially true forMuslim countries. It may take some
time to gain momentum as people in
Oman are still to come to grasp with the
basic principles of Islamic nance. But
with time it will grow to be a sizable
component of Omani banking industry.
As Sohar Islamic, we expect to get our
fair share of the market by focusing on
customer service and convenience.
What are the Islamic banking
products and services that Sohar
Islamic will offer initially? And what
sharia nance models they apply?
Sohar Islamic plans to offer a
comprehensive suite of products
and services for retail and corporate
customers. Our deposit products include
current accounts; savings accounts
and term deposits. The above products
will be based on Qard and Mudaraba
structures. Our retail nancing products
are mortgage nancing; automobile
nancing; debit card; and internet
banking. These products will be based
on Ijara, Murabaha, and MusharakaMoamma ha, hea - ilam Bak, Bak soa
COVERSTORY-ISLAMIC BANKS
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13/15
Mutanaqisa structures. Our corporate
nancing products are working capital
nancing; asset purchase nancing;
import nancing and project nancing(Ijara, Diminishing Musharaka).
The above products will be based
on Mudaraba, Murabaha, Ijara and
Diminishing Musharaka structures.
We hired a world renowned
consultancy rm Dar Al Sharia Legal &
Financial Consultancy to help us with
all the important aspects of launching
our Islamic banking window. Dar
Al Sharia is providing its expertise
in Sharia related matters, product
design, sharia governance and shariadocumentation to help Bank Sohar
launch a unique, authentic and
reliable Islamic banking window.
Where do you want to open branches
of Sohar Islamic this year in Oman?
Sohar Islamic intends to commence
operations soon (after obtaining
all necessary approvals) with four
branches covering Muscat, Batinah,
Salalah and Dakhiliya regions. We
plan to subsequently expand our
network with focus on nancialinclusion of the unbanked population
of Oman. ATMs will typically be
installed next to the branches. This
network will also be expanded later.
Sohar Islamic customer will have the
freedom to use any ATM on Oman Net
network absolutely free of charge.
Islamic nance is predicted to
achieve an asset base of RO1.5bn
by the end of 2013. How prepared
are you for this as you have to
compete against full-edged Islamic
banks with huge paid-up capital?
These numbers are mere estimations.
There are various studies coming out
with different estimates of the size
of Islamic banking after one year,
three years and ve years. Only time
will tell what size Islamic banking
attains in Oman over the next few
years. However, while the estimates
may be questioned, one thing is quite
certain: Islamic banking is here to stay
and to grow. It is expected to follow
suit of Islamic banking industries in
other GCC and Muslim countries.
Oman is a market of reasonable size.
Vision 2020 envisages Oman to be anon-oil dependent country and increase
the diversication of the economy into
the services, industrial and nancial
sectors. With eighth ve-year plan
underway projecting GDP of over
ve per cent and with enhanced
government expenditure in health,
education and infrastructure and
with implementation of an industrial
strategy focusing on IT, petrochemicals,
free zones, assembly and re-export,
and tourism, I am pretty sure that all
players including Islamic windowswill get their share of business.
Could Sohar Islamic leverage Bank
Sohars existing brand image in
the market to address new target
Islamic banking customers?
In a short span of ve years, Bank
Sohar has emerged as one of the
leading banking institutions in the
Omani market setting benchmarks
in the banking sector. The bank has
done extremely well during the past
ve years of its operations in theSultanate marking its footprint within
the economy. The banks management
ensures that the strategy followed by
the bank revolves around the economy
and therefore with the evolution of
the banking sector within the country
to introduce Islamic banking, Bank
Sohar has planned for the introduction
of its Islamic banking window
Sohar Islamic. The logo which has
previously been revealed represents
a new bloom or start of a new era in
Islamic banking in Oman. Each form
is inter-connected to reect the bond
between the customer and the bankas well as on the bond between the
customer and their Islamic values. The
identity is ever growing and evolving,
in essence sharing the promise of Sohar
Islamic, to provide its customers with
dynamic products and services, that
is in line with the Islamic principles.
The bank had also taken initiatives to
educate the public on Islamic banking
by conducting customer awareness
programmes in Muscat, Sohar and
Salalah. This is a key initiative inpreparing the public for the dynamic
change in the banking industry. Bank
Sohar has always strived to provide
customers with a unique experience in
all its services and the Islamic banking
will be no different. The bank is
working on offering its Islamic banking
window services at four different
locations within the Sultanate and has
taken various initiatives simultaneously
to ensure excellence in all its offerings.
There were concerns about thefeasibility of conventional banks
offering Islamic services through
window operations. What are
the measures you have taken
to alleviate such concerns?
Sohar Islamic intends to adhere to the
highest level of sharia-compliance
by meeting certain key conditions
including: complete segregation of
funds; stand-alone and independent
branches, separate sales staff,
existence of a sharia supervisory
board and sharia audit and compliance
unit; committed management;
the worlds best Islamic banking
software; and compliance with the
standards of the Accounting and
Auditing Organisation for Islamic
Financial Institutions (AAOIFI).
To ensure the highest level of sharia
governance and to have access to
unmatched sharia advice and guidance,
the bank has constituted its sharia
board comprising four reputed
international and local scholars.
Islamic banking is here
to stay and to grow. It is
expected to follow suit of
Islamic banking industries
in other GCC and Muslim
countries
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14/1598 April 2013
tapping hepenialIslamic bankingwindows constitutea close alternative tofull-edged Islamicbanks and, as it has
been observed inother countries, caneven compete withfull-edged Islamicbanks, observesAzmat Raque,Head of islamicBanking, Al Yusr,
Oman Arab Bank.An OER interview
Azmat rafque, hea of lam Bak, Al yu, Oma Aab Bak
COVERSTORY-ISLAMIC BANKS
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Oman Arab Bank (OAB) has already
announced its Islamic banking
window Al Yusr. When and where
Al Yusr will be starting its operation
and what are your expectations?
OAB has recently unveiled itsIslamic banking brand Al Yusr. This
is our dedicated Islamic banking
department. We have planned to
launch our operations ocially by
mid-year. Our agship branch will
open its doors to OAB customers and
other respectable clients in Muscat.
Further four branches will also open
within one year in other major cities
of Oman. We expect positive and
good response to our Islamic banking
services. This expectation is backed
by the demand of our existing clientsin OAB and also based on the nature
of our products which will soon enter
the Islamic banking market in Oman.
What are the Islamic banking
products and services that Al Yusr
will offer initially? And what sharia
nance models they apply?
We plan to focus on the retail, SME
and mid-tier corporate sectors in the
country. The choice of products has
been made carefully after assessing
the market, products that have beenoffered so far by our competitors
and keeping in view our strong
commitment to meet genuine needs
and demands of Omani customers.
We have plans to launch innovative
and value-added products that will
not only satisfy unique needs of
our targeted market segments but
will also help in the maturity of
overall Islamic banking industry
through availability of diversied
products in the market space.
Al Yusr is committed to its strict
compliance to sharia rules and
regulations. We have built our overall
organisational structure in compliance
with the Central Bank of Omans
guidelines in this respect. We adhere
to AAOIFIs accounting, auditing and
sharia standards. Al Yusrs operations
are being supervised by a competent
and renowned sharia supervisory
board. Dr Esam Al Enzi is the chairman
of our sharia board. He is being assisted
by Dr Khalid Al Siyabi and Dr Ahmad
Al Ayadi. Al Yusr also has a fully
functional sharia control department.
This department provides valuable
guidance and consultation on the
sharia issues to the banks management
and is equally entrusted to closelymonitor the routine operations of Al
Yusr to ensure sharia compliance.
Where do you want to open branches
of Al Yusr this year in Oman? And
what about your ATM networks?
Al Yusr will have its dedicated Islamic
banking branches. We will start our
operations with ve branches in the
rst year. These branches will be
located in the cities of Muscat, Salalah,
Nizwa, Sohar and Sur. All branches
will have ATMs but our customerswill also be able to use OABs ATMs
as well as other banks ATMs. Al Yusr
will bear the cost of OAB ATM network
use as this is a sharia requirement.
Islamic nance is predicted to
achieve an asset base of RO1.5bn
by the end of 2013. How prepared
are you for this as you have to
compete against full-edged Islamic
banks with huge paid-up capital?
This is an interesting question. We
understand the potential in the marketas well as the intense competition that
will gradually emerge in the future.
Al Yusr plans to focus on carefully
selected market segments and our same
strategy to focus on the niches drives
the nature and design of our products.
We intend to achieve the market
leadership in our chosen areas. We do
not wish to compete with full-edged
banks on product-by-product basis.
Will Al Yusr leverage OABs existing
brand image in the market to address
new target Islamic banking customers?
Oman Arab Bank enjoys the reputation
of a solid, stable and committed
bank. Indeed we wish to continuethis legacy of prudent banking. Our
overall Islamic banking strategy draws
its strength from our time-tested
business values. Our customers will
experience the same benets through
Al Yusr that they have historically
experienced with the additional
assurance of sharia compliance.
They will also have a thoroughly
enhanced experience due to our recent
technology investments for Al Yusr.
There were concerns about thefeasibility of conventional banks
offering Islamic services through
window operations. What are
the measures you have taken
to alleviate such concerns?
Islamic banking windows have
emerged as a successful business model
in various countries like UAE, Bahrain,
Pakistan, Malaysia, and Bangladesh.
Window can easily tap to the existing
clientele of the conventional bank,
leverage on its relationships with
corporates and regulators and relyon the existing operations, wherever
allowed by the sharia. Hence, in my
opinion Islamic banking windows is a
close alternative to full-edged Islamic
banks and, as it has been observed
in other countries, can even grow to
a size where they directly compete
with full-edged Islamic banks.
Al Yusr, in line with Central Bank of
Omans directives, is about to launch its
dedicated branches where only Islamic
banking services will be offered to our
customers. We have also acquired a
sharia-compliant core banking system
for Islamic set up. We have put in place
a robust corporate governance sharia
supervisory structure. Moreover, we
have raised separate capital to run
our Islamic business. Al Yusr also
has a well-trained and experienced
Islamic banking management team.
All these initiatives make Al Yusr
a fully sharia-compliant and will
for sure remove any doubts from
the minds of our customers.
Al Yusrs operations are
being supervised by a
sharia supervisory board
headed by Dr Esam Al
Enzi