By Humood al Mahrazi -
The careful and thorough studies that precede any projects play a key role in reducing the problems and minimising the risk of failure.
As it seems, the Islamic banking legislation expected within the amendments added to the Banking Act comes in this context and they have taken a bountiful share of studies and discussions as a new experience in the Sultanate.
We all followed the progress in these legislation while moving between the relevant authorities for review and discussion in transparency and clarity. This made everyone interact with the issue, banks and the public alike, in addition to allowing the establishment of two banks working in accordance with Islamic law which are Nizwa Bank and Al Izz Bank. It was allowed also to commercial banks to open ports operating accordingly.
However, what is surprising is to allow banks to move forward before the issuance of the amendments on the law that could govern the Islamic banking.
How it was allowed to Nizwa Bank, the first bank operates according to Islamic law to raise its shares for public subscription and collecting money and proceeding to complete the operational legal and procedures and other steps before the issuance of regulation that govern the dealings, because the capital cannot be moved or invested without a law that preserves investors' money.
This bank, which was officially set to start its business in the third quarter of this year, is until today left like ink on papers without any real activity.
It is true that the bank benefited in the last period to set all papers ready to start activation of the bank, but the current situation which resulted in the delay in the issuance of amendments to the Banking Act entail many consequences and according to the opinion of religious scholars that the inclusion of shares of a company that doesn’t exist at the first place is something that does not comply with the provisions of Islamic rules.
Given that the Bank Nizwa commercial enterprise like any other institutions that seek to make a profit and capital operation in the aspects allowed for this type of transaction, there is other effects resulting from the survival of the bank without the work so far, including the stock did not rise to the value expected in the stock market, and therefore reflected in the shareholders, especially small investors.
Given that the Nizwa Bank is a commercial enterprise like any other institutions that seek to make a profit and operate capital in the aspects allowed for this type of transaction, there are other effects resulting from leaving the bank not activated until today. The stock did not rise to the value expected in the stock market, and therefore this is reflected in the shareholders, especially small investors.
Because subscription in Nizwa Bank was allowed for Omanis and other investors, these problems reflect negatively on attracting foreign investment to the Sultanate as the foreign investor who subscribed to shares of Nizwa Bank, for example, is not bind to hold off and wait long months before he could evaluate his investment in the bank and get a return on this investment.
There are many local banks that have sought to allocate large investments to open ports operating according to rights on preference shares subscription and decisions remained without activation waiting for amendments, while some of them exercised this kind of banking without having this legislation which is problematic issue that requires clarification by the Central Bank.
Finally, Izz Islamic Bank at the gates of listing its shares also in the stock market, putting it as well on the road to nowhere! The question that repeats now is: when is the era of Islamic banking is actually going to begin in the country?