Oman’s Islamic banking sector is poised for growth driven by increased financing to small and medium enterprises (SMEs) and accelerated digital service offerings, industry experts said during the IFN Oman Forum 2026 roundtable held in Muscat on September 16.

Since its introduction in Oman in 2012, Islamic banking has seen substantial expansion, with its share of total banking assets rising from roughly 17 percent two to three years ago to over 20 percent, equivalent to around RO 9 billion, according to Ali Hassan Moosa, Financial Adviser at the Ministry of Finance. The sector has also evolved beyond traditional financing to include sukuk issuances and innovative financial products.

Moosa highlighted a recent Ministry of Finance sukuk issuance in June, valued at RO 100 million with an option for a RO 120 million re-issue. The five-year Ijarah sukuk offered yields exceeding 4.2 percent, reflecting growing investor interest and market sophistication.

Despite these advances, Moosa identified SME financing as a key area for further development. Currently, Islamic banks allocate over 60 percent of their financing to corporate clients and more than 30 percent to households, largely for housing. In contrast, SMEs receive only about 3 percent of Islamic financing, a disparity Moosa described as both a challenge and an opportunity. He suggested that Islamic banks could leverage Musharaka, an equity partnership model, to support SMEs if permitted under regulatory frameworks, and adopt financing approaches based on cash flow and data analytics rather than traditional collateral requirements.

Customer expectations have also shifted markedly since Islamic banking’s emergence. Sami Bait Rashid, Assistant General Manager at Meethaq Personal Banking, observed that initial customer migration to Islamic banks was primarily driven by demand for Sharia-compliant services. Over time, clients began comparing costs with conventional banking products, and the market has now reached a stage where customers prioritize transaction simplicity, speed, transparency, and personalization, he said. Bait Rashid emphasized that Islamic banks need to develop stronger value propositions aligned with these evolving consumer demands while maintaining sustainable business margins.

Suleman Muhammad, Head of Islamic Products and Segments at Muzn Islamic Banking, noted the retail Islamic banking market’s significant maturation. Today, Islamic banks offer a comprehensive suite of products, including housing and auto financing and credit cards. He stressed that compliance with Sharia principles alone is no longer sufficient to attract customers, who increasingly evaluate banks based on quality of service and digital capabilities. Muhammad predicted that digitization will be a critical driver of future growth in the sector.

Together, these insights underscore the dynamic evolution of Oman’s Islamic banking industry as it adapts to economic diversification goals and changing consumer preferences.