Oman’s first Islamic bank may open by end-2011

Oman’s first standalone Islamic bank, Bank Nizwa, may open its doors by the end of the year or early 2012, the sultanate’s central bank governor said in an interview with a local newspaper on Monday.

The bank, which received initial approval from the central bank in May, is expected to have a capital base of 150 million rials ($389.6 million), Hamoud Sangour al-Zadjali told the Times of Oman.

Al Zadjali added that the bank would float a 40 percent offering to the public through an initial public offering (IPO), although he did not provide a time frame for the IPO.

He was not immediately available for comment when contacted by Reuters.

While neighbouring Gulf states have ramped up Islamic finance services in recent years, Oman stood out by refusing to participate in the industry, with its central bank head saying in 2007 “banks should be universal”. The central bank reversed that stance in May.

Analysts said the creation of the country’s first standalone bank is an effort to keep investment funds within its borders as local investors sought sharia-compliant investments elsewhere.

Under the new stance, new Islamic banks would be allowed to open and conventional lenders could establish Islamic branches. Some lenders, such as Bank Muscat have already offered Islamic products to clients.

Al Zadjali told Times of Oman that none of the existing Omani banks have yet applied for a licence to offer Islamic banking products under the new policy.