Bank Nizwa seeks relaxation for investing funds overseas



Muscat: Bank Nizwa is going to request the Central Bank of Oman (CBO) for allowing the bank to get relaxation in deploying funds in overseas markets for a certain period, until Sharia-compliant products are available within the domestic market.

The bank is going to discuss with the CBO for extending the ceiling on overseas investment, until the bank finds these assets in Oman, Dr Jamil Jaroudi, Chief Executive Officer of Bank Nizwa, told Times of Oman, on the sidelines of a seminar on opportunities in Islamic finance in Oman organised by Thomson Reuters in conjunction with the CMA.
"Otherwise, you will have Islamic capital sitting idle in the country. They are positive and flexible. We have to go and present them," he added.

Dr Jaroudi said although Oman benefitted from being a late-comer in Islamic banking by learning from the mistakes of others, he said there are restrictions in the new law that does not allow Islamic banks to achieve their full potential. "One of the investment opportunities for Islamic banks is equity participation. However, we are not allowed to invest in a company more than five per cent as an investor. I do not have control (on the company), nor advice the company by nominating a director."

Banking regulation
As per the banking regulation, only up to 40 per cent of the net worth of a bank can be deployed in foreign currency-denominated assets and within that only five per cent can go to a single issuer. These are limits that will not allow Islamic banks and windows to deploy huge portion of their liquidity offshore.

In fact, it takes time for Islamic banks to book assets within the country and therefore, treasury becomes important. The CBO needs to frame regulation for short-term instruments, which will allow Islamic banks to deploy their excess liquidity.

"The law for sukuk and takaful need to be issued soon," noted an expert. Dr Jaroudi also noted that if these issues are not sorted out, the funds of Omani investors now deployed in Islamic institutions outside the country will not come back to the country. "So, the potential is there. But we have to really work fast in amending and making adjustments in the regulation," Dr Jaroudi opined.

Oman is well placed in attracting foreign Sharia compliant direct investment due to various favourable factors. Since the Sultanate is developing industrial zones, special economic zones and infrastructure the country can attract Islamic funds from overseas markets.

According to a survey conducted by Reuters, Oman came second in attracting investors and arrangers of sukuks. The total size of sukuk issues in the GCC soared to $26.6 billion in 2012, from $5.6 billion in the previous year. The sukuk issues are likely to achieve tremendous growth this year and next year as well, thanks to a large pipeline of projects. 

The seminar was organised under the auspices of the CMA executive president Abdullah bin Salem al Salmi. Apart from Dr Jaroudi, Mohammed Haris, AGM Islamic Banking, Bank Sohar, Sohaib Umar, Executive Manager, Ernst & Young and Dr Omar Hafiz, Secretary General, General Council for Islamic Banking and Financial Institutions, also addressed the seminar.

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