A May 2017 survey published by Oman’s National Centre for Statistics and Information found that 56% of Oman’s residents have accounts or deposits with banks operating in the sultanate, and this figure grows to 68% when only Omani citizens are counted. Omanis benefit from good access to financial infrastructure. The number of bank branches stood at 16.3 per 100,000 people in 2016, above the international average of 12.5% and surpassing many of its peers in the GCC, such as the UAE (12.4), Qatar (11.7) and Kuwait (14.3).

Conventional banks operated 470 branches throughout the sultanate in 2016, up from 468 the year before, according to the Central Bank of Oman (CBO), while the total ATM network consisted of 1181 machines, up from 1024 in 2012.

Encouraging Inclusion

A number of measures underpin high levels of financial inclusion, such as provisions of the country’s labour law obliging employers to pay salaries into bank accounts.

Large companies and government institutions have been compliant with this for many years, though implementation was initially patchier among blue-collar workers, and small and medium-sized enterprises (SMEs) prior to 2013. However, since then the CBO has been working with the Ministry of Manpower to ensure compliance, the levels of which have increased as a result.

The launch of sharia-compliant banking has also helped boost financial inclusion, giving an alternative to people who did not want to engage with the interest rate-based banking sector for religious reasons. The number of Islamic bank branches stood at 70 in 2016, up from 60 in 2015 and 32 in 2013, the year the sector launched.

In order to further encourage bancarisation, in 2016 the CBO started to link permission for new branch openings to adequate provision of financial services in underbanked areas such as border areas and remote, rural regions in the interior. In addition, the central bank is working to increase public awareness of the benefits of engagement with the formal banking system. In April 2017 it launched an nationwide awareness campaign that includes roadshows with the Oman Banking Association and presentations in schools.

The development of financial technology has unlocked further potential to expand this reach. In July 2017 the CBO launched a new mobile payment switching and clearing system, MpClear, which the central bank described as the first such system in the GCC. It provides unified switching and clearing services among local banks’ individual mobile-banking platforms, and allows for the transfer of funds using only a mobile phone number, thus allowing unbanked individuals to conduct money transfers.

“Banks are active in mobile and internet banking, and this offers a solution to remote areas, which are not yet adequately served by physical branches,” Lloyd Maddock, CEO of Ahlibank, told OBG. However, he said he did not expect to see mobile banking use to develop to the extent witnessed in some African countries. “Sector regulators in the region encourage digital platforms but are less likely to allow the sector to develop as fully it has in other emerging markets,” Maddock added.

Sme Lending

The authorities have also taken measures in recent years to boost access to financing for SMEs. A CBO requirement that banks devote a minimum of 5% of their commercial lending books to SMEs came into effect at the end of 2015. In practice, however, the sector has yet to reach the target, with the rate standing at around 3.5% in October 2017 according to figures cited by the CBO.

As of January 2018 the regulator is not penalising banks for failing to meet the requirement, but it is considering doing so in the future if the environment changes and SME financing requirements increase.