MUSCAT, JUNE 26 – The Central Bank of Oman (CBO) has constituted a task force to formulate a comprehensive strategy to support the growth and uptake of financial technologies (fintech) in the Sultanate. According to Dr Qais Issa Mohammed al Yahyai (pictured), Executive Vice-President, the task force’s remit covers the complete spectrum of emerging technological trends and developments that have implications for Oman’s banking and financial services industry. He made the announcement while delivering the keynote address at the launch of the Oman Islamic FinTech Forum (OiFF2019), which opened at the Sheraton Oman Hotel yesterday. The daylong event, billed as the first forum of its kind to highlight the potential of Islamic Fintech in the Sultanate, was organised by Elmangos, an Istanbul-based global business events producer and consultancy firm.
In his address, Dr Al Yahyai underlined the potential for new technology to make a positive impact in the Islamic finance sector. “Use of new technology can offer significant opportunity to Islamic financial institutions to reduce the cost of doing business and expand their outreach.
The distributed ledger technology, for example, could facilitate automated execution of contracts through the use of smart contracts, which can simplify the execution of Sharia compliant transactions, usually held up by heavy documentation requirements,” he said.
According to the official, Islamic banking in the Sultanate has emerged as an important and key component of the banking sector since it was launched in 2012. With two full-fledged Islamic banks and six Islamic banking windows, the sector has already achieved a 13.3 per cent market share in terms of total assets at the end of March this year, with total assets of over RO 4.5 billion ($11.7 billion) and an average year-on-year growth rate of 13.4 per cent, he said.
Significantly, Oman’s Islamic banking assets are the 13th largest in the world in terms of total assets, he noted, citing the IFSB Stability Report 2018.
Executive Vice-President urged Islamic banks and fintech firms to collaborate in facilitating knowledge transfer, reducing costs, and boosting efficiencies. This would help in mitigating any risk, given that Islamic fintech platforms are required to ensure their activities are Sharia compliant. Additionally, regulations require them to provide protection against losses due to non-compliance that “could imply additional risk and a potential financial burden in the form of capital buffer or liability insurance”, he explained.
Big Data, for example, is opening up new opportunities for more competition, platform-based finance of small and medium enterprises, said Dr Al Yahyai.
“Search, social media or other online user data work as a supplement to traditional risk metrics to judge the potential payment capacity and cash flow of smaller businesses which possess usually intangible assets.
Provision of finance to new sectors and SMEs will help Islamic Banking Entities (IBEs) to play their role more effectively in the diversification of the economy, as envisioned by the government,” he added.