Until recently, Oman had been the only one of the six Gulf Co-operation Council (GCC) states that prohibited Islamic finance on the grounds that no distinction should be drawn between Islamic and conventional banks. However, in May 2011, Qaboos bin Said Al Said, the sultan of Oman, issued a royal directive overturning this ban and authorising sharia-compliant services in the country.
The U-turn was prompted by the desire to tap the demand for sharia-compliant products and services that is currently being met elsewhere in the Gulf, resulting in a liquidity transfer from Oman to other countries in the Gulf. It is estimated that equivalent to $11bn-worth of Omani rials are currently deposited in GCC Islamic banks, much of it in the United Arab Emirates and Bahrain.
