Oman is quietly becoming the latest frontier for Islamic finance. Yet the country is under no illusions of the complexities in aligning its current practices and opening up its capital market to Islamic financial products.
Abdullah Salim Al Salmi, the acting CEO of Capital Market Authority of Oman (CMA), says that Islamic financing is becoming one of the biggest concerns of the CMA, after the decision taken by the sultanate’s government allowed it to handle Islamic financing instruments and Takaful.
In order to advance the services provided by both the Omani capital market and insurance sectors, the CMA is in the process of preparing the necessary arrangements and the pertinent legislative and technical studies to introduce new Shariah compliant products into the sultanate.
The CMA is also going to great lengths to ensure that the decrees will be both fit for purpose and not limited to Muslim investors and policyholders.
Saad Mohammed Al Saadi, the minister of commerce and industry, adds that they are to make sure that any regulations put in place will meet the present and future requirements of the Omani capital market as well as international best practices.
The CMA is almost certain to decree in favor of the establishment of standalone Takaful operators rather than licensing window operations as it prepares to draft its Islamic finance regulations. It is therefore likely that conventional insurance companies planning to enter the arena will have to seek a separate license and form a separate company in order to carry out Takaful operations in the sultanate.
However, a decision is still to be made regarding the formation of Shariah boards, with the CMA yet to decree whether they will require each Takaful company to have its own Shariah board or if they will establish an oversight Shariah body.
According to Mohammed Al Jamalani, the CMA’s vice-president for insurance operations, the CMA is debating whether to establish its own Shariah oversight board, either under the auspices of the CMA alone or in conjunction with other Omani government agencies such as the Central Bank of Oman.
All three initiatives have their own merits but ultimately a decision will have to be made based on the availability of qualified human capital in the sultanate, which has had limited exposure to Islamic finance, and the dearth of qualified Shariah scholars in an already competitive market.
The CMA, with input from the ministry of Awqaf and Islamic affairs, has also established a policy committee and appointed legal firm Clifford Chance to review and advise the CMA on the regulation of Takaful providers.
The CMA has granted initial approval for one conventional insurance company to convert its operations in order to provide Takaful cover and is currently reviewing applications for the establishment of two further providers.
The company, which has not yet been named, is due to commence operations by the end of the year. No decision has yet been taken on re-Takaful provisions.
Until the CMA finalizes regulations that are specific to Takaful providers, they will be required to comply with all other applicable insurance regulations, including the OMR10 million (US$26 million) capitalization requirement. — SW