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With a population of around 4.8 million, the Sultanate of Oman is a decent sized country within the Middle East. Around 55% of the total population, approximately 2.5 million individuals, are Omani nationals. The Omani national currency is the Omani Rial (OR), and it is one of the strongest currencies in the world.
All banking and financial service businesses within the country are managed by the Central Bank of Oman (CBO). Their duties and responsibilities are as follows:
The CBO came into power under the Banking Law of 1974, which set out its powers and responsibilities. It also laid down some of the groundwork for other banks, though its primary purpose was to provide power and basic groundwork for the Central Bank.
The 1974 Law was amended and expanded upon with the Royal Decree 114/2000. This Law modernized and expanded what was previously present, while also adding in important information relating to Islamic Banking Regulations in the form of a 6th Section.
Steps to Obtaining a Loan
Approaching a Bank:
In order to begin the process of obtaining a bank loan, an individual would first need to consider which bank to approach. Different banks would offer different incentives and would have slightly different requirements. With this said, many similarities between banks exist. There are three ways to initiate talks with a bank:
Required Documentation:
Once a bank has been picked out, one must first present that chosen bank with certain documents. These documents vary between specific banks, though the general minimum requirements for Omani national include:
These are the very minimum requirements and banks will specify the exact requirements on their websites or once an individual has made contact with them. The requirements have been kept vague. Therefore, individual banking requirements may vary, though pay slips are usually requested for the previous 3 months of employment. There will likely be further requested documents including proof of address and passport photos. The reason a full list of documentation is not available is due to the fact that it is largely left up to the bank to decide on one’s eligibility for a loan.
Limitations of the Loan:
On top of the required documents, there are further conditions in place. There is a minimum age requirement of 18 years old to a general maximum of 60.
The maximum amount that a bank can lend to an individual is usually 43 times the monthly salary of the individual in the case of them being an Omani national. This is far greater than the 12 times available for foreigners. The payback period is also greater for a national than an expatriate, with the maximum being 10 years.
Interest:
Islamic banks do not charge interest on loans. They have their own charges and methods of obtaining profits.
However, conventional banks will charge interest on personal loans. There is a ceiling on the interest rates that can be charged, which is mentioned in Circular BM 1112. Under Point 2 of this Circular, it is stated that the maximum interest rate a bank may charge is 6% p.a. and this amount has been the norm since October of 2013.
Within the Oman banking system, transparency is key. For example, banks are required to be completely forthcoming concerning interest rates. The rates are calculated on a 365-day basis, and the potential changes that could occur during the period of the loan must be made clearly known to the consumer before the loan is issued. In the case of Islamic banks, the banks must once again ensure total clarity as to the amount of profit that shall be earned from the loan.
The Contract:
Once all of the previous points have been covered and the bank agrees to offer the individual a loan, a contract will have to be formed and signed. The start and end dates would have to be specified along with the total value of the loan. The interest rate and any potential changes that may arise in it would have to be specified, and in the case of an Islamic bank, the fees and method of obtaining the profit would have to be outlined.
Glossary