New Islamic banks set up in Oman will struggle initially to compete with established conventional banks offering sharia-compliant services when the country opens up its banking market, Fitch Ratings said.
While there is demand for Islamic banking, and its growth across the Gulf region is likely to outpace that of conventional banking, recent experience from Qatar suggests that customers in Oman will opt to get these services from established banks.
“Newly-created Islamic banks in Oman will face competition from incumbents such as BankMuscat and HSBC Bank Oman, which are setting up Islamic banking arms in preparation for the upcoming rule changes. We believe the combination of a well-known brand, an established network, service quality and cost-efficiency savings will give the incumbents a significant advantage. While the established banks will need to keep their existing and Islamic operations separate at the point of contact with the customer, there will be plenty of opportunities for cost savings at the operational level,” Fitch said in a statement.
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