8/6/2019 Oman Opts for Islamic Banking!

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People-friendly and visionary measures welcomedWed, 04 May 2011

MUSCAT A cross section of people Oman Observer caught up with say the new measures announced byHis Majesty the Sultan are far-sighted and will go a long way in addressing some very basic needs of thenation. The Royal directives to establish a government university of science and technology, governorates in allregions, municipal councils in all governorates Islamic banking and expansion of technical colleges are basedon realistic assessment of the nations requirement and are crucial at the current stage of Omans development.The establishment of science and technology university and expansion of technical colleges augurs well for thenation in that this announcement has come at a time when Oman needs to push forcefully towards achievingnational self-sufficiency in higher education. Experts say the only way to reduce a nations dependence onforeign higher education institutions is to develop local colleges and universities. In fact, Oman should be the

hub of higher education and a pre-requisite for this is to first shed its dependence on foreign institutions inoverseas lands.Strengthening Omans higher education infrastructure with more colleges and universities would undoubtedlygo a long way in promoting human resources development and this in turn will help promote Omanisation andself-employment.

Experts say Oman is a country of vast natural resources. It is a land of opportunities. So it is only befitting a country like to Omanpool all its resources to develop its own educational system, its own industrial infrastructure, and its own human resources so toreduce dependence on overseas sources to the extent it is possible in todays interdependent world.The Royal directive for the establishment of Islamic bank has also been widely welcomed. In fact, some people feel, the Islamic

banking the system, which as has posted tremendous success in many parts of the world, has been long overdue in Oman.Experience shows that the Islamic banking system can be carried out without charging interest and still competitively edgeconventional banking.A significant trend in global finance over the last two decades has been the rapid growth of Islamic banking and finance (IBF), whichhas gathered momentum to become a significant feature of the financial landscape in the present century.According to Almir Colan, an IBF expert, Islamic banking adds value to the real economy. The worlds Islamic financial landscape ischanging and competition is heating up. Many European countries want to be the hub of Islamic banking and finance.Dr Syed Bashir Ahmad (pictured), Assistant Professor, University of Nizwa, says: The amazing strides made by Islamic bankinghave prompted even the Western financial institutions to expand their Shari`ah-compliant instruments. Malaysia, Bahrain and othercountries have had their heydays since long. Total assets of Islamic banks are reported to be over $ 1 trillion.It is the right time that a prudent leader like His Majesty Sultan Qaboos has seized the opportunity to attract the much neededinvestment into the Sultanate from foreign investors who have been disillusioned otherwise since the 2008 financial crises and wouldlike to invest in stable environments like that of the Sultanate.With its noble reputation Oman has a potential to overtake Malaysia and Bahrain in a short time. This is equally true about the

potential of local savings which otherwise shied to deposit and invest in conventional banks. I am sure that the Sultanate is going towitness even greater economic strides in the coming years and that this historic directive of His Majesty the Sultan will be

remembered as a milestone through years to come and a noble gift to the people of Oman, adds Dr Bashir.Almir says, To put it into global context we only have to look at the IBF situation in the UK with 22 banks in London (including fivethat are fully Shariah compliant), twenty sukuk issues raising $11 billion listed on London Stock Exchange, 20 law firms supplyingservices in Islamic finance and a number of institutions offering educational and training products supporting the IBF industry.Why Islamic banking is a boon for the world? Islam prohibits making money by money, but it allows legitimate profit by allowingmoney to be used to trade tangible assets. The only means to benefit from the money is to convert its monetary function to economicfunction through either trading or investment.Thus, the Quranic verse "Allah has permitted trade and has forbidden interest (usury) (2:275) is the reason why Islamic finance inits essence must always be asset, service or project base.It is however important to make sure that Islamic banking remains Islamic and authentic with the process pure and direct and it is nothigh jacked by profit hungry giants to suit their purposes.Experts say in Islamic finance you cannot make money out of thin air. Our dealings have to be tied to actual economic activity, likean asset or a service. You cannot make money off of money.

You have to have a building that was actually purchased, a service actually rendered, or a good that was actually sold.In Islamic banking, depositors are like partners their money is invested, and they share in the profits or, theoretically, the lossesthat result. Oman has seized the moment at the right time, Al Hamdulilah, say experts.

By Conrad Prabhu, Maryam Khalfan, Ali Ahmed al Riyami, Kabeer Yousuf and Hasan Kamoonpuri