MUSCAT: The Central Bank of Oman (CBO) has introduced a pioneering electronic system designed to provide Sharia-compliant liquidity management tools for Islamic banking institutions. The initial phase features the launch of Qard Hasan and Restricted Mudaraba instruments, aimed at injecting liquidity in Omani riyals into the banking sector. These instruments were carefully reviewed and approved by the Supreme Sharia Supervisory Board of the CBO, ensuring full compliance with Islamic finance principles while meeting regulatory requirements. The system represents a major step toward modernizing liquidity management in accordance with both Sharia law and national financial policies.
Under the new instruments, the CBO provides liquidity to Islamic banks against Sharia-compliant securities accepted as collateral. Islamic banks then utilize this liquidity by investing in other Sharia-compliant financial instruments, effectively acting as speculators within the framework of Islamic finance. This structure ensures that all transactions adhere to Islamic legal principles while promoting efficient liquidity flow across the banking sector. The initiative is expected to strengthen the stability of the financial system while providing alternative investment opportunities consistent with Islamic law.
The electronic platform also supports the issuance of government securities, including Islamic treasury bills and sukuk, expanding the scope of Sharia-compliant financial instruments available in Oman. Future phases of the system will focus on introducing tools designed to absorb excess liquidity from the banking sector, helping to maintain financial stability and control monetary conditions effectively. Integration with the national financial market infrastructure, including the Real-Time Gross Settlement System and the Muscat Clearing and Depository Company, ensures smooth operation and real-time settlement capabilities.
This system marks the first of its kind in the Middle East and North Africa region, offering a diverse range of Sharia-compliant liquidity management tools that support both monetary and fiscal policies. It complements earlier CBO initiatives, including the launch of a US dollar-denominated money market instrument in December 2022. By providing a comprehensive electronic platform for Islamic banks, the CBO reinforces its commitment to promoting financial innovation, stability, and compliance with Islamic principles across the Sultanate’s banking sector.
