Oman’s Islamic finance sector is set to exceed $40 billion, driven by regulatory reforms and rising sukuk issuance. The sector continues to experience strong growth despite being the smallest in the Gulf Cooperation Council. Fitch Ratings projects growth between the second half of 2025 and 2026, reflecting increasing demand for Shariah-compliant financial services.
Islamic banking assets in Oman reached $23.6 billion, marking a 16.8 percent increase year-on-year. This growth far outpaces the 5.7 percent rise seen in conventional banks. Islamic banks and windows now account for roughly 20 percent of total banking system assets, up from 18.1 percent previously. The sector benefits from expanding branch networks and enhanced digital banking services.
Sukuk continues to play a central role in the Islamic finance of Oman. It accounts for around 30 percent of total Islamic finance assets and represented 31 percent of debt capital market issuance. The country issued its first Islamic commercial paper earlier this year, supporting liquidity management. Fitch reports $7.25 billion in outstanding Omani sukuk, all rated BB+ with a positive outlook and no defaults.
Oman’s regulatory reforms underpin sector expansion. The Central Bank of Oman introduced a framework for digital banks and updated banking laws with provisions for Islamic finance. New instruments enable liquidity against Shariah-compliant securities. Additionally, the regulator released a draft framework for Shariah-compliant finance and leasing operations. These initiatives strengthen the Islamic finance of Oman while enhancing investor confidence.
Structural challenges remain, however. The sector faces underdeveloped Islamic hedging products and limited foreign participation in riyal-denominated sukuk. Assets under management in Islamic funds remain small, at around $400 million, and the takaful segment holds 18 percent of gross direct premiums. Nevertheless, ongoing reforms and Vision 2040 initiatives create opportunities for growth in banking, sukuk, and insurance.
Omani Islamic finance is positioned for continued expansion. Rising public awareness, supportive government policies, and growing sukuk markets contribute to the sector’s potential. Fitch notes that strong business conditions, stable oil prices, and targeted regulatory reforms provide a favorable environment for Islamic banks and financial institutions.
