A report by Fitch Ratings reported that Oman’s Islamic finance sector is expected to reach up to $45 billion this year, increasing from $36 billion at the end of 2025, backed by a favorable macroeconomic environment.
The rating agency stated that the expected 25 percent year-on-year expansion will be underpinned by rising demand for sukuk as both a funding mechanism and a public policy tool, with government-led initiatives and growing grassroots demand for Shariah-compliant financial products.
Sukuk constituted approximately 60 per cent of the US dollar-denominated debt issuance, a significant drop from 94.3 percent previously, with the remaining share leading conventional bonds.
Regardless of this development, Fitch pointed to persistent structural factors, such as the lack of Islamic treasury bills and derivatives, the underdevelopment of Omani rial sukuk and bond market, and the less significant role of Islamic non-bank financial institutions.
The banking sector in Oman is still indicative of consistent progress towards Vision 2040, the long-term development strategy of the country dedicated to diversification of the economy, growth of the private sector, and increased financial capabilities.
The report observed that operating conditions are favorable in both Islamic and conventional banks in Oman based on the high, but slowly declining, oil prices.
The increased credit flows, especially to non-financial corporates and households, are contributing to the expansion of small and medium-sized enterprises and increasing domestic investment.
However, such trends are strengthening the efforts of Oman to lessen its reliance on hydrocarbons and develop a more diversified economy.
Fitch forecasts a loan growth of 6-7 per cent in 2026, driven by increased demand both in the retail and corporate sectors. The agency projects that the proposed 5 percent personal income tax, which will be introduced by 2028, will have a relatively minor overall effect on banks.
Islamic banking in Oman came to light with the preliminary licensing recommendations issued by the Central Bank of Oman in May 2011, permitting full-fledged Islamic banks and Islamic banking windows to operate alongside conventional institutions.
This regulatory framework was legally entrenched in December 2012 by amendment of the Banking Law by a royal decree that mandated the establishment of Shariah supervisory boards and placed on the central bank authority to establish a High Shariah Supervisory Authority.
