Increasing numbers of Omani corporates are considering sukuk issuances as the country develops its framework for Islamic financing.
It is predicted that the development of the sukuk market will allow for a shift away from bank financing, which has been traditionally relied upon.
However, even this sector is small in comparison to the country’s neighbours. “The banking sector in Oman is still relatively nascent, and a number of entities have in the past found it easier and cheaper to access funding from banks based in the United Arab Emirates,” said Mansur Mannan, Director at Tejara Capital.
“By developing a sukuk market, the Omani authorities hope to replicate what is happening in the UAE where corporates are increasingly tapping the sukuk market,” Mannan noted.
It is expected that the development of the country’s sukuk market will enable corporates to get tighter pricing on any issuances as a result of the wider investor base that Sharia compliant financing attracts, as well as further increase foreign investment into the country.
“In the past there has been more desire to build sukuk markets in other Gulf Cooperation Council (GCC) countries, and Oman has always been a restricted market which is now trying to catch up,” said Mannan.
He added that the majority of investors in Oman have placed their money in Dubai as they want their funds to go towards Sharia compliant forms of financing. Oman is now building its sukuk market to try to bring investment back into the country.
The development of a strong domestic sukuk market has the potential to draw in investment. “Sukuk issuances from Oman have so far been few and far between; the recent reforms are a positive step towards the development of a Sharia compliant market,” said Jamil Mufti, a Portfolio Manager at Bank of London Middle East.