Oman’s Islamic finance sector is entering a transformative phase, with 2026 expected to mark a pivotal year for the industry. According to Fitch Ratings, the sector is on track for continued expansion, supported by a strong regulatory framework, rising demand for Shariah-compliant financial products, and a strategic shift toward international capital markets. As the Sultanate advances its economic diversification agenda under Vision 2040, Islamic finance—particularly US dollar-denominated sukuk—is expected to play an increasingly central role in Oman’s financial system.
Fitch forecasts sustained double-digit growth for Oman’s Islamic finance industry through 2026, with total sector assets projected to reach approximately $45 billion. This follows rapid expansion in recent years, with the industry surpassing $36 billion by mid-2025. Although Oman is a relatively recent entrant to Islamic finance within the Gulf Cooperation Council, it has demonstrated strong momentum, with Islamic banking assets now accounting for around 20% of total banking system assets. Growth in Islamic banking continues to outpace that of conventional banking, a trend Fitch expects to persist as more consumers and corporates adopt Shariah-compliant solutions.
Sukuk issuance is playing an increasingly prominent role in Oman’s debt capital market. Fitch notes that sukuk now represents a significant share of the country’s outstanding debt, reflecting a broader regional shift toward Islamic financing instruments. The agency expects that most Omani US dollar issuances in 2026 will be in sukuk format, driven by the need to access a wider pool of global Islamic investors and the suitability of sukuk structures for long-term infrastructure and development projects undertaken by the government and state-linked entities.
Investor confidence in Oman’s Islamic finance sector has been strengthened by improvements in the country’s sovereign credit profile. Following Oman’s sovereign rating upgrade to BBB- with a Stable Outlook, several Omani sukuk have also benefited from rating upgrades. Fitch describes these issuances as “rising stars,” noting that enhanced credit quality has helped lower borrowing costs and improve the appeal of Omani issuances in international markets. Across the region, credit quality remains strong, with about 84% of Fitch-rated GCC sukuk classified as investment grade.
While local currency issuances remain important for domestic liquidity, Fitch anticipates a strategic shift toward US dollar-denominated sukuk in 2026. This move is intended to attract international capital and further integrate Oman into global financial markets. As corporates and government-related entities refinance existing debt or fund new projects, dollar-denominated sukuk offer access to deep and diversified pools of global liquidity, with the GCC increasingly positioned as a major source of US dollar debt and sukuk issuance among emerging markets.
Fitch also attributes the sector’s resilience to the proactive approach of the Central Bank of Oman. Recent regulatory initiatives, including the introduction of liquidity management tools for Islamic banks and a draft framework for Shariah-compliant leasing, have strengthened the industry’s operating environment. In addition, digital innovation is expected to support future growth, with digitally native notes and blockchain-based sukuk potentially gaining traction, following similar developments in Qatar and the UAE. These advancements could enhance efficiency, reduce issuance costs, and broaden access to Islamic finance.
Despite the positive outlook, Fitch cautions that external risks remain. These include geopolitical tensions in the Middle East, oil price volatility, and evolving Shariah standards, particularly the implementation of AAOIFI Shariah Standard No. 62. While no immediate disruption is expected, shifting Shariah interpretations could pose longer-term challenges for documentation and structuring, and a significant decline in oil prices could increase funding requirements, potentially leading to higher levels of deficit-financing sukuk issuance.