ASSIGNMENT - ISLAMIC BANKING AND ACCOUTING
Scenario or Tasks - Islamic Banking is a relatively new phenomenon in the financial services industry in Oman. Islamic Banking Regulatory Framework (IBRF) was issued by the Central Bank of Oman (CBO) at the end of financial year 2012 which is enforced by the a Royal Decree. IBRF permits three types of Islamic Banking Entities collectively called IBEs.
- Full Fledged Islamic Banks
- Islamic Banking Windows by Domestic Conventional Banks
- Islamic Banking Branches by Foreign Banks
At present, two full-fledged Islamic Banks and six Islamic Banking Windows (IBWs) are licensed to operate by the CBO.
Full-fledged Islamic Banks
1) Bank Nizwa
2) Alizz Islamic Bank
Islamic Banking Windows of domestic conventional Banks
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Name of Conventional Bank
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Islamic Banking Window
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1) Bank Muscat
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Meethaq
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2) Bank Sohar
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Sohar Islamic
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3) Ahli Bank
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Al Hilal
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4) Bank Dhofar
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Maisarah
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5) Oman Arab Bank
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Al Yusr
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6) National Bank of Oman
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Muzn
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Due to the religious inclination of the people, Islamic Banking products and services are gaining market share at a pace faster than anticipated. As per the recent figures, the shares of Islamic Banking in total banking assets has reached to approximately 12% which is considered huge achievement by the industry experts in only five years' time span.
IBEs are offering competitive products and services to attract and enhance their customer base. Oman has adopted a more stringent and conservation Islamic Banking approach and does not allow "Commodity Murabaha" as a financing tool. Currently, during the initial phase, IBEs are offering vanilla products including but not limited to the following:
Financing Products
- Auto Finance (based on Murabaha and Ijarah contracts)
- Home Finance (based on Diminishing Musharaka and Ijarah contracts)
- Personal Finance (based on Murabaha and Services Ijarah)
- Term Finance i.e. for corporate customers (based on Murabaha, Ijarah, Diminishing Musharaka and Wakala contracts)
Deposits Products
- Current Accounts (based on Qarz)
- Saving Accounts (based on Mudaraba contracts)
- Time Deposits (based on Mudaraba and Wakala contracts)
Requirements - Select two Islamic Banks and two Islamic Banking Windows of the Conventional Banks and analyze three products from each entity (two financing and one Deposit product).
Prepare a report of 1500-1700 words which:
1. Explains the various Islamic banking contracts.
2. Analyses the products selected from the Banks Windows based on the contracts. Compare the similarities and differences.
3. Provide your observations how these products are different from conventional banking products.
The report should be structured with appropriate references and begin with an introduction and end with a conclusion.