Diversification of Islamic Financial Instruments

144

3.7.3 ISLAMIC CAPITAL MARKETS IN OMAN

Although the Islamic banking in Oman is gaining ground, but in order for the system to grow

further and sustain the same, complimentary support is necessary via other sub sectors. In the

current Omani setup, this includes mainly the support for the capital markets and the

insurance (takaful) sectors. Whereas Oman has formally entered the takaful industry, as will

be discussed later, instituting an Islamic Capital Market, remains farfetched. However, few

important developments provide some encouragement to witness an Islamic Capital Market in

Oman. To this end, at an early stage, in 2013, Oman launched its maiden Shariah index, to be

known as the Muscat Security Markets Shariah Index. The index currently comprises of 31

listings with a market capitalization of around $30bn v/s a $72bn GDP (Shaukat, 2015).

The Capital Market Authority- CMA is the regulatory authority regulating the secondary and

stock market in Oman called the Muscat Securities Market. Royal Decree 59/2014 amended

the then prevalent Capital market laws Oman’s Capital Market Law (Royal Decree 59/2014) to

pave way for Islamic modes. It is the first law to formally recognize Sukuk as tradable

securities in Oman and granted the CMA authority to determine requirements for Sukuk

issuance and provide incentives for Sukuk issuances. In April 2016 the CMA sought to further

strengthen its Sukuk framework through an amendment stipulating the creation of a trustee

structure and a limited liability company as a special purpose vehicle for issuing Sukuk. The

new rules left the question of obtaining a rating optional for the issuer, and did not limit the

Sukuk amount to a percentage of the issuer’s capital, as some had anticipated. The purpose of

the revised regulation is to bring greater transparency to Sukuk issuances, thereby

safeguarding the interests of all concerned parties. This not only spurred the ambitions of

corporate Sukuk issuances in the country but also helped the Sultanate to issue its maiden RO

250 million Sovereign Ijarah Sukuk, 2015 and is supporting further the plans of a second

Sovereign Sukuk. The maiden Sukuk were nearly twice oversubscribed. As of now Sukuk

rightly remains the main product for an infant and overall closed market like Oman

3.7.4 TAKAFUL (ISLAMIC INSURANCE) IN OMAN

While the CMA is the main body mandated to regulate Islamic Capital Market initiatives and

Sukuk, the same also has extensive powers to license, control and oversee Takaful operators.

Oman’s Takaful Insurance Law was approved on March 6, 2016 via Royal Decree 11/2016. The

new law regulates all aspects of a Takaful operator’s activities including oversight and

reporting requirements, product standards and liquidity levels. It requires Takaful insurers to

be publicly listed on the Muscat Securities Market (MSM) with a minimum capital of OMR10

million. The law is based on the AAOIFI guidelines and provides a robust and comprehensive

framework covering all aspects of the Shariah-compliant insurance sector. According to the

Capital Market Authority (CMA), Takaful insurance premiums in Oman totalled OMR39 million

(US$101 million), representing a market share of 8.7% of the insurance sector as a whole in

2015

The Takaful law further mandates the CMA to supervise the conduct of Takaful insurance

business and prevents conventional underwriters from setting up Islamic insurance windows

For more detail, see Shaukat, M (2017a, b) and Shaukat, M (2017c),

“Islamic Finance, FinTech and opportunity for Oman”.

Forth coming, College of Banking and Financial Studies, Muscat, Oman.

For more detail, see, Insurance Market Review, 2015, Capital Market Authority-CMA, Oman.