The Central Bank of Oman (CBO) is making significant strides toward integrating sustainability into the nation’s financial sector, with a special emphasis on Islamic finance. During the IFN Oman Forum 2024, Tahir bin Salim al Amri, Executive President of the CBO, highlighted the bank’s initiatives to align Islamic banking with sustainable development goals and green finance practices.
Al Amri announced that the CBO is nearing the completion of a regulatory framework dedicated to climate risk management. This new set of guidelines will equip Omani banks with strategies to effectively manage climate-related risks, ensuring that governance frameworks are in place. “Our aim is to embed sustainability and green finance principles within the banking sector, consistent with Oman’s broader national vision and strategic goals,” stated Al Amri.
In preparation for this initiative, the CBO has engaged in extensive consultations with the banking industry. This ensures that the new regulations will meet both local needs and international best practices. The framework will help banks manage environmental, social, and governance (ESG) risks while allowing flexibility for institutions to adopt more comprehensive sustainability measures voluntarily. By aligning their sustainability disclosures with global standards, Omani banks will enhance transparency, which in turn boosts investor confidence in the financial system.
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Al Amri underscored that sustainability is not a choice but a necessity for competitiveness and long-term resilience. “Incorporating sustainability into banking operations not only fosters a more resilient economy but also enhances the reputation and competitiveness of financial institutions in the long run,” he noted.
In addition to sustainability, the CBO is working to expand Sharia-compliant financial products to further promote growth in the Islamic banking sector. A new licensing framework is underway, enabling finance and leasing companies to offer Sharia-compliant services, which is expected to attract more investors and widen the reach of Islamic finance in Oman.
Moreover, the CBO is preparing a regulatory framework that will guide conventional banks wishing to voluntarily convert to Islamic banking. This mirrors models implemented successfully in other countries where Islamic and conventional banks coexist. Since its introduction in 2013, Islamic banking in Oman has contributed RO 6.4 billion in new Sharia-compliant financing, accounting for nearly half of the additional deposits generated in the past decade.
To further support Islamic banking, the CBO is investing in the development of a treasury platform that will introduce more Sharia-compliant liquidity instruments, such as lender-of-last-resort facilities and Islamic treasury bills. Al Amri announced that one such instrument is already in place, with additional tools expected to be launched by the year’s end.
As Oman continues its efforts to diversify its economy and fortify its financial sector, Islamic finance is positioned to play a pivotal role. “The Central Bank of Oman is committed to guiding our banks and financial institutions on the path of sustainability, ensuring a bright and prosperous future for both the sector and the country,” Al Amri concluded.