Muscat: Meethaq, the pioneer of Islamic banking in Oman from Bank Muscat, recorded a momentous year in 2012, bracing itself for innovative Islamic banking operations, subject to approval from the Central Bank of Oman.
With the Royal Decree issued by His Majesty Sultan Qaboos bin Said, establishing Islamic banking operations, Meethaq is well positioned to provide Islamic financial expertise to diverse segments and thereby promote the good of society as a whole.
Hailing the Royal Decree, Sulaiman Al Harthy, group general manager — Islamic banking, said: "The Royal Decree on amendments to the banking sector laws reflects the attention accorded by His Majesty to achieve stability, prosperity and development in Oman. The Royal Decree is in harmony with the modern stage of renaissance and compatible with values of the community and its principles. His Majesty's vision encapsulates the roadmap for the present as well as the future of the development march in the Sultanate encompassing all fields."
Al Harthy added: "The creation of an efficient and effective private sector capable of participating in the economical and social development process and able to compete globally is a major achievement under the wise leadership of His Majesty. The Royal Decree creates an environment suitable for the smooth functioning and development of Islamic banking in Oman.
"The Islamic finance industry is growing very rapidly worldwide and this is a great opportunity for new Islamic banks as well as conventional banks to come together and create an environment which should make all of us proud, balanced with the Sharia law, Central Bank of Oman's guidelines, public demands and expectation, and the rule of law, as a whole.
"His Majesty's focus on the development of Oman with preservation of the identity, fundamentals and values, serve as a source of pride for all Omanis. In keeping with Islamic tenets, His Majesty Sultan Qaboos has given the consent to practice Islamic banking in Oman to fulfil the financial needs of different segments of society, which will positively contribute to the overall development of Oman."
Over a year ago, the flagship financial services provider announced the decision of its board of directors to set up an independent Islamic banking window at the bank and launch Islamic banking operations in accordance with the injunctions of Sharia.
In the run-up to comply with the CBO requirements, Bank Muscat unveiled the logo of its Islamic banking window under the brand name 'Meethaq' at the Oman Islamic Economic Forum. Further, in line with CBO requirements, the bank announced the formation of a three-member Sharia board to ensure the Meethaq operations are in compliance with Sharia. The bank has on board some of the brightest minds in Islamic finance to chart the way forward. The Sharia board is led by Sheikh Dr Ali Qaradaghi, chairman, and Sheikh Essam Mohammed Ishaq and Sheikh Majid Al Kindi as members.
During the year, Bank Muscat took major strides as part of its proposed Islamic banking operations and assigned RO150 million capital for Meethaq Islamic Banking. The Sharia board of Meethaq Islamic Banking approved RO150 million capital assigned by Bank Muscat for its Islamic banking window operations awaiting regulatory approval.
From Sharia perspective, the board endorsed the authenticity of capital allocation from Bank Muscat shareholders' fund for operations of independent Meethaq Islamic Banking. Ali Qaradaghi, explained that the capital allocation is in line with injunctions of Al Quran and As Sunnah and the fact that various contemporary Sharia scholars have endorsed the usage of shareholders' fund for Sharia compliant transactions.
Though Bank Muscat board of directors has assigned RO150 million capital for Meethaq Islamic Banking window operations, the final allocation will be determined by business opportunities in the market and the board has indicated that the assigned amount may increase if required. The capital allocation is subject to necessary regulatory approvals.
Al Harthy said: "Meethaq will reach out to customers with the promise of being true to their beliefs, offering all the advantages of banking by following the principles of the Sharia law. The Meethaq suite of banking products which combine traditional values with modernity are in the pipeline to give the choice of staying true to one's values. Inspired by faith and a tradition of trust, Meethaq will help customers stay true to their values."
The Meethaq strategy is to attract customers through innovative products and services. Bank Muscat has always strived to fulfil the needs of customers with innovative solutions and the launch of Meethaq is yet another proof of its commitment and dedication to meet customer expectations for Islamic banking. The operations will be managed by an experienced team, separate from conventional banking.
Meethaq stands out for its independent Sharia Supervisory Board, separate capital, unique risk management tools, fund segregation, separate books of account, core banking system which supports Islamic banking operations, separate Islamic banking branches and proper profit distribution mechanism among investment account holders/depositors. The adoption of AAOIFI (Accounting & Auditing Organisation for Islamic Financial Institutions) standards will boost and streamline the Meethaq Islamic Banking practices in terms of standardisation of products and services.
Support to OIEF
Meethaq supported the Oman Islamic Economic Forum (OIEF) which highlighted that the Royal directive of His Majesty Sultan Qaboos on Islamic banking marked a milestone in the modern history of banking and finance in the Sultanate of Oman. The forum spotlighted the importance of Islam in the socio-economic development of Oman and the wider Muslim world and the new era of Islamic financial intelligence in the growing field of alternative banking and finance.
Seminar on Islamic banking
Meethaq hosted a series of seminars across Oman to raise awareness on Islamic banking. Sharia and Islamic banking experts addressed the seminars aimed at familiarising people with the main characteristics of Islamic finance. The seminars shed light on important aspects of Islamic banking from the Sharia perspective.
Al Harthy said: "Since Islam is the religion of the Sultanate of Oman as stated in the Basic Law, Oman is ideally placed to play a leading role in Islamic finance. Omani commercial codes are completely supportive to Islamic banking structure without any conflict. The commercial code has a very strong Sharia foundation in the form of Article 2, 4 and 5 of Royal Decree 55/1990."
Meethaq hosted a workshop on 'Islamic Liquidity Management and Capital Market' in association with International Islamic Financial Market (IIFM). Aimed at knowledge-sharing by leading Islamic finance industry representatives and regulators, the main objective of the workshop was to identify best Islamic finance practices that can be adopted in Oman.
Patronised by the Central Bank of Oman and Capital Market Authority, the workshop was attended by representatives of reputed global Islamic finance organisations and banks.
The workshop was well conceived, featuring relevant topics covering the regulatory, operational, liquidity and risk management issues, besides trends in Sukuk market and the extremely important topics on financial stability and credit enhancements.
Islamic banking is fast growing globally but still evolving in terms of new ideas, standards and practices on regulatory and operational aspects. Regulators are trying to make the regulatory framework for Islamic banking as robust and practical as possible in Oman. While best possible adaptations may be made, they must also be acceptable to the market, hence it will be an evolving process.
The workshop assumed importance against the backdrop of the global financial crisis, reiterating the fact that a strong capital base is necessary for banking and financial institutions, but on its own is not a sufficient condition to ensure stability. A strong capital base must be supplemented by strong liquidity tools. The workshop was premised on this scenario to further support the growth of Oman's Islamic finance system to be a resilient and sustainable system.
The workshop focused on identifying instruments to facilitate liquidity management for Islamic banks as well as help achieve a reasonable commercial return and also fulfil their traditional role of financial intermediation between depositors and productive activity such as financing.
Women in Business forum
Meethaq hosted a 'Women in Business' forum attended by livewire businesswomen and successful entrepreneurs who highlighted the opportunities available for women entrepreneurs as well as the skills required to become effective business leaders.
The rationale behind hosting the forum titled 'Inspire, Challenge and Change' stemmed from Bank Muscat's commitment to support women empowerment. In line with the progressive policies pursued by the government in empowering women, the bank offers key support to women development programmes.
The bank acknowledges that the development of Oman significantly hinges on the role played by women and that they need to be provided the required support to realise their full potential. With women comprising a major customer segment, Bank Muscat offers unique products and services targeted at them.
In-country value addition
Meethaq organised a seminar on 'In-Country Value Addition' addressed by Dr Mahathir Mohamad, who during his tenure as prime minister of Malaysia between 1981 — 2003, played a key role in generating in-country value from the industrial and service sectors in Malaysia.
The seminar stemmed from Bank Muscat's commitment to creating in-country value vis-à-vis participation in the socio-economic development of Oman. The seminar focused on a vital topic in the context of Oman addressing the requirements of youth representing more than 50 per cent of the country's population, and ensuring development benefiting communities in all parts of the country.
The seminar also highlighted the importance of in-country value percolating to small and medium enterprises (SMEs) as Oman's economy is witnessing a gradual shift towards SMEs.
Islamic finance forum
Meethaq, in association with Amanie Advisors, a leading global Sharia advisory firm in the field of Islamic finance, hosted the two-day Muscat International Islamic Finance Forum, which served as a vibrant platform for industry leaders and experts to discuss new possibilities and collaborations in Islamic banking and finance. The forum was attended by Mahathir Mohamad, who delivered the keynote address.
The forum helped in building up momentum for the launch of Islamic banking operations in Oman. The forum spotlighted Islamic banking and finance tools and the future of Islamic capital markets.
Over 500 senior industry figures, global investors, Takaful operators and bankers as well as top Sharia scholars attended the forum and shared their insights and knowledge on prevailing global best practices in Islamic banking and finance.
Specifically, discussions centred on the current state of Sukuk market, new opportunities for Takaful providers, winning strategies for distributing funds; and issues faced by new Islamic banks in Oman, such as asset-liability management, treasury and inter-bank money markets.
A key focus at the forum was on assessing the 'Asset-Liability of Islamic Banks: The Issue of Islamic Liquidity Management'. Against the backdrop of the Arab Spring, the forum also discussed how to manage new finance opportunities in the MENA region. Islamic finance in North Africa was another area highlighted in the forum.
Spotlighting on BancaTakaful, the forum provided a new dimension to Takaful distribution in the most cost-effective and profitable way to bring this product to markets. 'Takaful in New Markets: Prospects and Challenges' was another topic discussed in the forum which was designed to be practical with ideas and solutions to encourage participation and exchange of information.
Pioneer of Islamic banking award
Meethaq won the Pioneer of Islamic Banking in the Sultanate Award from Global Islamic Finance. The Global Islamic Finance Award (GIFA) is the first-of-its- kind award in Islamic banking and finance. Based on an objective proprietary methodology — developed and operated by Edbiz Consulting — the awards recognise and celebrate success and contributions of individuals and institutions in the Islamic financial services industry.
Al Harthy said: "Bank Muscat is the first financial institution in the Sultanate to introduce Sharia compliant products to the public. Meethaq will adopt the best practices in Islamic banking and finance worldwide and combine a robust model which will protect customers and complement the Islamic banking industry. Meethaq will reach out to customers with the promise of being true to their beliefs, offering all the advantages of banking by following the principles of Sharia law and its requirements."