The financial system of the Islamic banking is followed by the Sharia rules of Islam. The vital factor which constitutes in the Islamic banking system is that it restricts the collection of interest and any factor concerning interest rates which influences the business operations. Sharia law provides guidance to the financial banking system of Islam, and it maintains the standards which is totally dependent on the banking system of Islam (Dummies, 2019). This banking system is acknowledged and welcomed throughout the financial system in the world. The set of rules and regulations are old and it has innovated through the following years.
The first bank in Oman was formulated with the Central Bank of Oman while receiving its initial grant from the same; this bank is termed as Bank Nizwa which has been licensed to Sheikh Saud bin Ali Al Khalili. This bank provides services to the commercial banking system in accordance with the license which is issued by the Central Bank of Oman and the law of bank which is propagated by the Royal Decree No. 114/2000 (Cbo.gov.om, 2019). This banking system is under the law of Sharia board which provides validations and opinions of the Bank which comply to the Islamic Banking principles which is provided to all operations and several other financial aspects. If a bank needs to follow a certain rule to regulate the Islamic financial system then the body needs to follow the Sharia principles (Cbo.gov.om, 2019).
It is considered that financial institutions have developed outstanding development on varied fields within a very short period of 4 years. This has been formed with the basis of growth in the rigid network of several branches formed inside and outside the country in order to form awareness on the products of Sharia laws and practices (Timesofoman.com, 2019). The growth of Islamic banking system is hiked through a decade, which has led to flowing innovations, providing good quality products and services to the customers. Islamic banking system followed the growth of around 40% in the total deposits of the customer (Timesofoman.com, 2019). This has led to the growth of OMR 2.8 billion from the amount of OMR 2 billion in the same year, one is in the initial part of the year and the other is in the eventual part of the year. Since the age if initiation of the Islamic banking age, the banks have shown its escalation very rapidly. Islamic banks have created its new grounds where several employees work and computing to the environment which is very computable (Timesofoman.com, 2019). These banks also provide several advantages to the customers by catering them products from both traditional and innovative banking system of Islam (Timesofoman.com, 2019). It has been noted that the growth in the banking system in Oman was around 15%, which was around 20% in the other Gulf countries. The then urban setup has now opened the door for the institutions of Oman to grow in the rural and other interior units of the region. To state that Islamic banking service has a special emphasis to penetrate in the rural areas and in small towns in to develop their business (Timesofoman.com, 2019).
However, to showcase the growth of the Islamic Banking in Oman it is very important to show the strength and weaknesses that is associated with the market of operation where the Islamic Banking operates. Therefore, the SWOT analysis on Islamic Banking of Oman has been made to show the growth of the banking sector in Oman (Timesofoman.com, 2019).
SWOT Analysis of Islamic Banking system in Oman
|Strengths||· 100% of Oman citizens follow Islamic religion.
· Expenses in any activities like purchasing of weapons, alcohol, pork, immoral business activities or other transactions against the rules and regulations of Islam is restricted.
· Sport activities like fraud or gambling is strictly restricted.
· A business trader must possess certain items which when they are sold he/she must entertain its loss any sufferings.
·Sharing of capital, loos and gains must be adhered to the fact on the terms of partnership business.
· The new system of Islamic banks have cost advantageous factor which when rose have low-cost deposits.
|Weaknesses||· Banks in Oman have troubled establishment with other competitive banks in the global financial market, because the banks in Oman follows the rules and regulations of Sharia laws which are not accept by most of the banks.
· Only those who are under limited income category gets the benefit of microfinance products.
· Certain Regulatory Authority structure of Sharia law of Islam board in Oman is in absence.
· Lack of scholars with high qualifications and lack in efficient managers.
·Islamic Banking law in Oman is absent.
|Opportunities||·In Oman the religious population is Muslim and all of them follow Sharia law.
·Sharia board can be formed if the issues are related to the Islamic banks.
· The banking arm of the Islamic banking system in Oman should be initiated in other countries too.
·Islamic banking system in Oman is considered to be one of the highest growing economies in the country.
·On the basis of the demographic study, almost all the population of Oman is Muslim.
·Career opportunities are there in this ground of Islamic banking system.
· Majority of the people in the Oman know about the structure of the Islamic banking system which will lead to the future development of the financial market.
|Threats||·Uprising uncertainties in the economic structure of the Islamic banking system.
·People are not concerned about the innovative structures in the Islamic banking system in Oman which has resulted in the basic relationship with the banking pattern.
·There are several incorrect understandings or misunderstanding on the grounds of the financial banking system in Oman.
·Youth don’t possess any interest in pursuing career in the Islamic banking system in Oman.
·Reduction in the price of crude oil in Oman.
·Students and youths of Oman don’t possess any interest in attaining higher educational qualifications.
PESTLE Analysis of the Islamic Banking system in Oman
|Political||·Government agencies and other bureaucratic bodies have a rigid and solid influence on the organization in this society.
·The decision of the market is highly affected by the politics of the nation and the Islamic politics.
|Economic||·Purchasing power of the organization needs to be determined and how the organization can adopt variable method of profitability.
·There is a gap between the living standards of well-developed Western and Asian countries which has led to the several complexities in the international markets.
|Social||·The value and traditions of the financial banking of Oman is ordered and maintained by the Islamic rules and regulations. The Sharia law is one and only maintenance and parenting ground of Islamic banking system in Oman.
·The society in which the people are living also affects the background of the financial system in order to invest or make transactions with the Islamic way of banking system.
|Technological||·The technological behavior in the condition of the financial banking system in Oman is changing rapidly and new technology is taking place of the traditional technology.
·Proper development of the Research and Development activity, rate of technological change, impact of emerging technologies, impact of internet which results in the reduction of the cost of communication.
|Legal||Sharia law develops the legality of the Islamic Banking financial system.|
|Environmental||The sustainable development of the Islamic Banking system needs to be developed.|
In Oman the Islamic banking system is one of the leading developments on the ground of economy. The SWOT and PESTLE analysis has been provided above in order to analyze the banking pattern and other characteristics of Islamic banking system. Several marketing strategies need to be implemented by the banking system in Oman in order to improve performance and further development in sustainability.
Cbo.gov.om (2019). Retrieved from https://cbo.gov.om/sites/assets/Documents/English/LawRegulations/BankingLaw.pdf
Islamic banks post 32% growth in financing. Timesofoman.com (2019). Retrieved from https://timesofoman.com/article/122448
Key Sharia Principles and Prohibitions in Islamic Finance – dummies. (2019). Retrieved from https://www.dummies.com/personal-finance/investing/emerging-markets/key-sharia-principles-and-prohibitions-in-islamic-finance/