Muscat – Oman’s Islamic finance industry is expected to record double-digit growth in 2026, supported by favourable economic conditions, the continued importance of sukuk as a funding and policy tool, government initiatives, and strong public demand for sharia-compliant products, according to Fitch Ratings.

The rating agency noted that sukuk accounted for the majority of all US dollar-denominated debt issuance in 2025, at around 60%, with the remainder comprising conventional bonds.

‘We estimate that the Omani Islamic finance industry reached about $36bn at end-2025 and could approach $45bn in 2026. Islamic banking assets account for around two-thirds of the total, followed by outstanding sukuk at about 32%. The wider ecosystem remains nascent, with takaful and Islamic asset management together accounting for only around 2.5%,’ Fitch said in a statement.

The Central Bank of Oman (CBO) recently approved a regulatory framework for sharia-compliant finance and financial leasing companies. Fitch said, clearer regulation and stronger oversight could help create an enabling environment, boost investor and stakeholder confidence, and attract capital, the rating agency said.

In Oman, the market share of Islamic banks and Islamic windows of conventional banks rose to around 20% of banking system assets at end-November 2025, up from 19.2% in 2024. Islamic banking assets reached $24.1bn, with growth outpacing that of conventional banks.

According to Fitch’s analysis, Islamic windows at six conventional banks held more than 60% of Islamic banking assets in 2025, benefiting from their parent banks’ established franchises and infrastructure. The CBO has also launched an electronic system providing sharia-compliant liquidity management tools for Islamic banks.

‘Business conditions remain favourable for Omani Islamic and conventional banks, supported by high, though moderating, oil prices. The authorities’ commitment to economic diversification under Oman Vision 2040 should continue to provide growth opportunities for banks,’ Fitch said.

Fitch expects sector loan growth of 6%-7% in 2026, driven by stronger demand from both retail and corporate segments. Corporate lending growth is expected to align with government spending on energy and infrastructure projects.

The agency said the authorities have a high propensity to support the banking system. It added that the proposed 5% income tax from 2028 is likely to have a limited overall impact on banks, although Islamic banks could be marginally more affected due to their greater focus on retail customers.

Fitch upgraded several Omani sukuk following Oman’s sovereign rating upgrade to ‘BBB-’ in December. At end-2025, Fitch rated around $6.5bn of outstanding Omani sukuk, with 88% rated ‘BBB-’ and the remaining 12% rated ‘BB+’. All issuers carry stable outlooks, and there have been no defaults.

It noted that Oman’s debt capital market still remains the smallest in the GCC. ‘We expect Oman’s debt-to-GDP ratio to rise to 35.8% in 2025 and to remain around that level until 2027. The authorities aim to reduce debt to close to 30% of GDP and to gradually increase the share of domestic debt by developing the local market and refinancing part of upcoming external debt maturities in riyals’.

‘This strategy includes regular scheduled issuances in the local market, revisions to the regulatory framework, and greater participation in international clearing mechanisms to attract global investors,’ Fitch added.