Oman’s Islamic Finance Sector Set to Surpass $45 Billion by 2026: Implications for Investors and Entrepreneurs
Muscat: Oman’s Islamic finance sector, valued at approximately $36 billion at the end of 2025, is forecasted to grow to $45 billion by 2026. This anticipated growth highlights the robust expansion of Sharia-compliant finance within the Sultanate.
According to Fitch Ratings, the industry is expected to experience double-digit growth this year, driven by favorable economic conditions, the pivotal role of sukuk as a funding mechanism, government initiatives, and strong public demand for Sharia-compliant financial products.
Fitch estimates that Islamic banking assets comprise roughly two-thirds of the sector’s total value, followed by sukuk, which account for about 32 percent. Despite this progress, the overall ecosystem remains in its early stages, with takaful and Islamic asset management together contributing around 2.5 percent.
Notably, the share of Islamic banks and Islamic branches of conventional banks grew to approximately 20 percent of banking sector assets by the end of November 2025, up from 19.2 percent a year earlier. Islamic banking assets reached $24.1 billion, with their growth outpacing that of traditional banks. Six conventional banks operating Islamic windows held over 60 percent of the Islamic banking assets, benefitting from their existing infrastructure and market presence.
Recent initiatives from the Central Bank of Oman (CBO) bode well for the sector’s growth. Key measures include the implementation of an electronic system for Sharia-compliant liquidity management tools tailored for Islamic banks. Additionally, the CBO has approved a regulatory framework for Sharia-compliant finance and financial leasing companies.
However, Fitch highlighted “structural constraints” that need addressing, such as the absence of Islamic treasury bills and derivatives, an underdeveloped Rial Omani sukuk and bond market, and a limited presence of Islamic non-bank financial institutions. Clear regulations and improved oversight could foster a more favorable environment, enhancing investor confidence and attracting capital.
In 2025, the Financial Services Authority (FSA) established the Supreme Sharia Supervisory Authority, which has since evaluated the draft insurance law. As of January 2026, assets managed in Islamic funds were relatively modest, totaling approximately $575 million, while the takaful sector represented 18 percent of gross direct premiums by the end of 2024.
Despite these challenges, the outlook for both Islamic and conventional banks remains positive, supported by stable oil prices. This momentum aligns with the ongoing efforts to diversify the economy under Oman Vision 2040, thereby unlocking additional opportunities for the banking sector.
In terms of debt issuance, sukuk comprised about 60 percent of all US dollar debt issued in 2025, with conventional bonds making up the balance. Several Omani sukuk were upgraded following Oman’s sovereign upgrade to ‘BBB-’ in December.
Fitch rated approximately $6.5 billion of outstanding Omani sukuk at the end of 2025, with 88 percent rated ‘BBB-’ and 12 percent rated ‘BB+’; all issuers were on stable outlooks with no defaults reported. Demand for sukuk continues to be supported by GCC Islamic and conventional banks. Additionally, Oman Electricity Transmission Company issued the nation’s first green sukuk (rated BB+) in 2025, and 2025 also marked the issuance of Oman’s inaugural Islamic commercial paper.
Special Analysis by Omanet | Navigate Oman’s Market
Oman’s Islamic finance sector is on a robust growth trajectory, expected to reach $45 billion by 2026, presenting strategic opportunities for businesses eager to tap into the burgeoning demand for Sharia-compliant products. However, investors must be mindful of structural challenges, such as the limited range of financial instruments and the need for stronger regulatory frameworks. Smart entrepreneurs should leverage government initiatives and regional demand to innovate within this expanding market, ensuring they remain competitive as the sector evolves.
