Oman's Islamic finance market comprises the Islamic banks and Sharia-compliant windows licensed by the Central Bank since 2012, together with the sukuk, funds and takaful insurers supervised by the Financial Services Authority.
Last Gulf country to let Islamic banks in
Until 2011 the sultanate was the only member of the Gulf Cooperation Council without an Islamic bank, as the authorities had long kept a purely conventional system. The change of course announced that year was followed by fast rule-making, with the first institutions opening within two years.
Royal Decree 69/2012 and a dedicated framework
Royal Decree 69/2012 amended Banking Law 114/2000 to bring Islamic banking into it. The same year the Central Bank of Oman issued the Islamic Banking Regulatory Framework, which sets licensing, Sharia governance, accounting and risk management rules specific to these institutions.
Which licence types exist in Muscat?
The framework distinguishes the full-fledged Islamic bank from the Islamic window opened inside a conventional bank. Since 2020 a third form exists: the Islamic subsidiary of a conventional group, created when alizz islamic bank merged with the Al Yusr window.
Islamic windows: funds kept apart from the parent
A window may not mix its resources with those of the host bank: allocated capital, separate accounting and its own financial statements are required. A customer of Meethaq at Bank Muscat, or of Sohar Islamic, therefore signs contracts ring-fenced from the group's interest-based business.
Bank Nizwa, alizz islamic and six windows from 2013
Bank Nizwa received the first full Islamic banking licence in 2012. Six windows started in 2013 within local banks, including Maisarah at Bank Dhofar, Muzn at National Bank of Oman and Al Hilal at Ahli Bank, alongside Meethaq, Sohar Islamic and Al Yusr.
A supreme Sharia authority inside the central bank
In 2015 the Central Bank created the High Shari'ah Supervisory Authority, a national Sharia supervision body. It aims to harmonise positions on products across the country and to narrow differences between the institutions' own Sharia boards, which keep their approval role.
Sharia board, compliance and audit in every institution
Each bank or window must have a Sharia supervisory board of qualified scholars, a compliance function and an internal Sharia audit. Standard Murabaha, Ijara or diminishing Musharaka contracts for homes or cars go through this chain before they reach customers.
A takaful fund protecting deposits since 2024
The Deposit Protection Law issued in 2024 provides for a takaful fund dedicated to Islamic bank deposits. Based on mutual contribution, it avoids covering depositors of Islamic institutions through a conventional fund that would invest its reserves in interest-bearing instruments.
Sovereign sukuk in rials, then in dollars
The government issued its first sovereign sukuk in Omani rials in 2015, followed by a first dollar sukuk in 2016 aimed at international investors. These issues fund the budget and give local Islamic banks the compliant liquid assets they had long lacked.
State sukuk open to individual savers
In 2020 the state offered a sovereign rial sukuk to individuals for the first time. For an Omani saver the practical benefit is access to a Sharia-compliant investment with periodic income, paid as rent or profit rather than interest coupons.
Muscat Stock Exchange and the Financial Services Authority
The stock market, renamed Muscat Stock Exchange in 2021, lists sukuk and Islamic companies. Since 2024 the Financial Services Authority has taken over the role of the former Capital Market Authority, supervising securities issues, funds and insurance, including takaful.
Listed takaful insurers: what a resident should read
Two listed takaful insurers, Takaful Oman and Al Madina Takaful, offer motor, health and family cover, with the operator charging a Wakala fee for management. An expatriate can subscribe but should check how any underwriting surplus is shared between participants and operator.
Specialist external source
The Central Bank of Oman's website sets out the Islamic banking regulatory framework, the licensed institutions and the sector's main milestones since 2012.