Oman’s CMA explores novel initiatives to boost liquidity

MUSCAT, NOV 16 - The Capital Market Authority (CMA) is weighing the introduction of a number of new products and instruments designed to enable, among others, small and medium enterprises to tap the capital market for their financing needs, while also creating new investment opportunities for the retail masses. According to a high-level official, these initiatives include Exchange Traded Funds (ETFs), sukuk issuances based on a blockchain platform, and a crowdfunding platform for small investors. Kemal Rizadi Arbi (pictured), Expert / Adviser at the Capital Market Authority, said the initiatives, when ultimately implemented, will help support the development of a vibrant capital market — encompassing both conventional and Islamic finance. It will also widen the investor base in the Sultanate, thereby broadening the capital market itself, in turn creating a new sector in the Omani economy that will result in employment generation and other benefits, he stated. Speaking at the Islamic Finance Conference organised by the Oman-France Friendship Association (OFA) last week, Kemal said the initiatives currently being explored by the Authority include Exchange Traded Funds (ETFs), which are typically investment funds that are listed and traded on exchanges much like stocks. An ETF is a basket of stocks that reflects the composition of a stock market index. Its trading value is based on the net asset value of the underlying stocks that it represents. “We are looking at Exchange Traded Funds and are working towards drafting some regulations to this end,” said the official. “Further, with the goal of supporting financial inclusion — notably by attracting smaller investors/players into the capital market — we are looking at sukuk issuances via the blockchain platform, because blockchain promotes transparency. This allows smaller companies, such as SMEs, to issue sukuk through an electronic platform. Also in support of financial inclusion, we are looking at crowdfunding platforms to cater to SMEs and small players in general.” These initiatives, said Kemal, will bolster the growth of an Islamic Capital Market for the benefit of not only the bigger players, but crucially, also for SMEs, enabling them to tap the capital market for their funding requirements. “When implemented, they will contribute to expanding the value chain of the capital market, and with new instruments coming on to the market, we will be able to attract more foreign investors and hopefully enhance liquidity in the market,” he stated. Tracing the growth of the Islamic capital market in the Sultanate over the past six years, the Expert noted that it currently accounts for around 11 per cent of the combined conventional and sharia-compliant segments of the capital market, encompassing equities, fixed income and investment funds. Takaful insurance, which is also regulated by the CMA, also accounts for around 11 per cent of conventional and Takaful insurance combined. “This 11 per cent growth of the Islamic capital market over a span of six years is commendable, when compared to other jurisdictions,” Kemal added.