Combined assets of the country’s Islamic banks and Islamic banking windows rose 10.5% year-on-year to RO10.1 billion at the end of July 2026, according to the latest data from the Central Bank of Oman (CBO). Islamic banking now accounts for about 19.1% of total banking-sector assets.

The growth has been driven primarily by financing. Outstanding financing provided by Islamic banks and windows increased 10.9% year-on-year to RO8 billion by the end of July, while deposits rose 10.3% to RO8 billion.

Oman’s Islamic banking industry comprises two fully fledged Islamic banks and five Islamic banking windows operated by conventional lenders. The sector has expanded rapidly since the CBO introduced its Islamic Banking Regulatory Framework in 2012.

By the end of 2024, Islamic banking assets had already reached RO8.3 billion, representing 19.3% of the banking system.

Fast-growing Gulf market
The expansion has placed Oman among the faster-growing Islamic banking markets in the Gulf.

Moody’s Ratings said Oman recorded the highest compound annual growth rate among GCC Islamic banking markets over the past five years, at 12%, compared with about 10 per cent in Saudi Arabia, the UAE and Kuwait.

The ratings agency expects demand from both retail and corporate customers to continue supporting growth.

Corporate financing is becoming particularly important. At Oman’s two standalone Islamic banks, corporate financing represented 63% of total gross Islamic financing in 2025, while retail financing accounted for 37%.

Corporate financing grew at a compound annual rate of 12% between 2020 and 2025, compared with 8% for retail financing, according to S&P Global Ratings.

The trend reflects the expansion of Oman’s non-oil economy and demand for financing from companies operating in sectors targeted under the country’s economic diversification strategy.

Industry restructuring
The sector is also entering a period of structural change.

The CBO introduced an Islamic Banking Windows Conversion and Transformation Framework in July, establishing a phased process from 2026 to 2030 for Islamic banking windows operated by conventional banks to transition towards standalone Islamic banks.

The central bank says the reform is intended to strengthen governance, accountability and operational autonomy while giving institutions sufficient scale to compete regionally.

One potential consequence is consolidation. Bank Nizwa has proposed acquiring and merging Alizz Islamic Bank, a transaction that Moody’s said could create Oman’s largest standalone Islamic bank if completed.

The CBO is simultaneously seeking to deepen the Islamic capital market. Its initiatives include developing Wakalah certificates of deposit and Islamic government treasury bills, alongside efforts to accelerate domestic sukuk issuance.

Asia Al Raisi, the CBO’s deputy chief economist for investment and market operations, said a deeper domestic sukuk market could diversify funding sources, finance productive investment and attract a wider investor base.

From growth to depth
The next challenge for Oman’s Islamic finance industry is therefore less about expanding its headline balance sheet and more about building deeper and more liquid markets.

Industry executives speaking at the IFN Oman Forum said Islamic banking and sukuk had achieved considerable scale, but asset management, takaful and other capital-market products remained relatively small. Oman’s Islamic finance industry could reach about USD 45 billion in assets this year, according to industry estimates.

Asset quality will also require monitoring as portfolios mature. S&P estimated Islamic banks’ non-performing financing ratio at 3.6% at the end of 2025, with exposure to cyclical sectors such as real estate and construction accounting for about 12% of portfolios.

For Oman, the expansion of Islamic banking is increasingly tied to the wider economic transformation agenda. The CBO has identified deeper Islamic money markets, sukuk development, responsible digital innovation, stronger governance and greater financing for diversification sectors as priorities.

With assets now above RO10 billion, the sector has established a significant foothold in Oman’s financial system. Its next phase will depend on whether the country can convert that scale into deeper capital markets, broader investment products and stronger regional competitiveness.

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The World Bank estimates that over 1.7 billion people worldwide are “unbanked”, with little to no access to formal finance. It goes on to estimate that only 15% of citizens in the Middle East have access to a bank account.

The new office in Muscat, which became fully operational in February 2019, will see a permanent and multinational team of risk management and financial specialists oversee the digital transformation of financial institutions in the region, including the development of the Oman Credit Bureau and Creditinfo’s other Middle Eastern customers. The team will share knowledge and provide fintech innovation, including the deployment of psychometric analysis and digital onboarding solutions, to increase the speed and accuracy of onboarding new customers.

Today’s announcement reinforces Creditinfo’s commitment to help businesses across a host of sectors to make better use of valuable information. With the organisation’s experience in credit risk scoring and modelling, Creditinfo will be supporting companies across the region to lend responsibly. Part of this will see Creditinfo introduce software platforms in the region such as automated decisioning tools, which allow lenders to capture data from multiple sources and build, deploy and benefit from custom decision-making parameters within seconds, rather than hours or days.

“It is an exciting time across the Gulf region, lenders are changing the way in which they operate and make decisions on an individual’s creditworthiness based on a varied base of traditional and non-traditional data.” commented Gary Brown, Head of Commercial Development—Creditinfo Gulf. “Creditinfo’s goal is to be at the forefront of facilitating access to finance in each of our markets, but also to help lenders reduce risk.”

“The Middle East is an interesting market for financial services and fintech businesses. With such a large portion of unbanked citizens in the region, the new hub will help financial institutions, governments and central banks throughout the Gulf to build and deploy new infrastructures and services to reduce this number,” commented Stefano Stoppani, CEO Creditinfo Group. “This new hub will allow our team to strengthen our offerings and capabilities within this diverse and fast-growing market.”

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Camille Paldi

March 31, 2016: In the Oman Vision 2020 framework issued by the government, the country proclaimed that it is determined to reduce its dependency on oil revenues through diversification of the economy.

Al Maha Financial Services LLC predicts strong economic growth in Oman based on the following factors: (1) Spending on mega projects such as the Sohar refinery and Duqm airport; (2) Favorable demographics as a key driver for growth in the consumer lending segment and higher disposable incomes of the youth population; (3) and the introduction of new institutions dedicated to solely offering Islamic banking services and the opportunity to offer Islamic services through a windows model.

Prior to 2011, Oman prohibited Islamic finance on the grounds that no distinction should be drawn between Islamic and conventional banks. However, in May 2011, a royal decree authorising Islamic finance was issued. Subsequently, in December 2012, the government decreed an Islamic Banking Regulatory Framework, which serves as a guide to the regulation of the emerging Islamic finance and banking industry in Oman. In April of 2013, the Central Bank of Oman followed suit with the creation of a team of bankers dedicated to overseeing the Islamic finance and banking sector in Oman.

In 2014, Oman set up a centralized Shari’ah board with five members who have direct oversight of Islamic banking institutions similar to the arrangement in Pakistan, Malaysia, Morocco and Nigeria.  The High Shari’ah Supervisory Authority convened for the first time in March 2015.

As of date, Oman has granted licences for Islamic banking to Bank Nizwa and Alizz Islamic Bank.  Currently, there are six Islamic banking windows in Oman, including Al Yusr (operated by Oman Arab Bank), Meethaq Islamic Banking (Bank Muscat), Sohar Islamic (Bank Sohar), Muzn Islamic Banking (National Bank of Oman), Al Hilal Islamic Banking (Ahli Bank) and Maisarah Islamic Banking Services (Bank Dhofar).

Islamic banking assets in Oman are projected to reach 10% of total banking assets by 2018. In the first half of 2015, the eight Islamic banks/windows combined extended OMR1.4 billion ($3.62 billion) in credit. In the same time period, conventional banks extended OMR17.8 billion ($46.05 billion) in credit.

In contrast to conventional banks in Oman, insurance operators are prohibited from offering takaful windows. There are currently two takaful companies operating in Oman, Al Madina Takaful and Takaful Oman Insurance, which are both listed on the Muscat Securities Market. Recently, Oman United Insurance secured board approval to convert its business into a takaful company.

The State Council, Oman’s upper house, approved the draft Takaful Insurance Law in mid-February of 2015, which includes 58 classified subjects in eight chapters covering all aspects of the activity. The legislation, which was drafted by the sector regulator, the Capital Market Authority (CMA), is expected to encourage the development of the Islamic financial sector, according to Salim Al Ghattami, chairman of the State Council Economic Committee.

The potential for growth is high, both for takaful operators and conventional insurers. Penetration rates are estimated to be around 1.1%, according to Moody’s. The market has expanded with an annualised growth rate of over 14% between 2006 and 2013, largely attributed to compulsory motor coverage. In 2014, the takaful operators in Oman commanded 6% of gross direct premiums and 4% of total paid claims.

Appetite for Islamic financial products was underlined by the success of two takaful insurer IPOs at the end of 2013. The share offerings in Al Madina and Takaful Oman were both heavily oversubscribed, almost four times in the case of Al Madina and 5.5 times for Takaful Oman, raising between them nearly OM59m ($153m).

In terms of sukuk, the Omani government opened subscriptions to its inaugural sovereign sukuk of OMR200 Million ($517.73 million) on October 8, 2015.  The Islamic unit of Bank Muscat, Oman’s largest lender, plans a dual-currency sukuk deal of approximately $300 million as part of a 500 million Omani Rial sukuk programme, which the bank’s shareholders approved in March 2015.

Overall, the outlook and opportunities for Islamic finance in Oman look strong.

Camille Paldi is CEO of Franco-American Alliance for Islamic Finance

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