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Oman’s Islamic Finance Sector: Regulatory Framework and Supervision

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The Sultanate of Oman has made significant strides in developing its Islamic finance sector, with a robust regulatory framework in place to ensure the sector’s growth and stability. The country’s financial authorities have implemented various regulations and guidelines to govern the operations of Islamic banks, takaful companies, shariah-compliant real estate investment trusts (REITs), and sukuk issuances.

Takaful Insurance Law

The Takaful Insurance Law requires takaful insurers to be publicly listed on the Muscat Securities Market (MSX) and have a minimum capital of no less than 10 million Omani rials. The law also mandates that takaful operators form an internal specialist shariah committee for auditing their shariah compliance. Other key provisions of the law govern:

  • Maintenance of solvency margins
  • Fund setup and management
  • Transfer of takaful business from one company to another

CMA’s Regulatory Powers

The Capital Market Authority (CMA) is the primary regulator of Oman’s Islamic finance sector. The CMA has issued executive regulations for the Takaful Insurance Law, which provide for:

  • Segregation between the assets of a takaful operator and a takaful fund
  • Establishment of shariah supervisory boards within takaful operating companies

The CMA also regulates shariah-compliant REITs, requiring them to establish a shariah committee or use the services of a shariah board or third-party committee to ensure that their activities are compatible with Islamic law. The CMA has the authority to:

  • License REITs
  • Investigate licensed entities
  • Take disciplinary action against them

CBO’s Regulatory Powers

The Central Bank of Oman (CBO) is responsible for regulating standalone Islamic banks, standalone Islamic banks owned by conventional banks, and Islamic windows operating in Oman. The CBO has the authority to:

  • License Islamic banks and windows
  • Inspect and audit their financial statements
  • Investigate their activities
  • Issue guidance and warnings

The CBO also has the power to:

  • Suspend or cancel a licensed bank’s activities
  • Confiscate its assets
  • Impose fines or deny access to credit facilities

Before imposing any penalty, the CBO may notify the defaulting licensee of its breach and grant it an opportunity to cure the breach.

Regulatory Framework for Sukuk

The Commercial Companies Law (CCL) regulates the issuance of sukuk in Oman, which are required to comply with shariah principles. The CMA is responsible for regulating sukuk issuances and licensing corporate entities seeking to issue sukuk in the country.

In conclusion, Oman’s Islamic finance sector operates within a robust regulatory framework that ensures its growth and stability. The country’s financial authorities have implemented various regulations and guidelines to govern the operations of Islamic banks, takaful companies, shariah-compliant REITs, and sukuk issuances.