| Summary: | Islamic banking is a new industry that has been expanding globally. Currently, there exist
more than sixty banks and financial institutions that offer Shariah complaint products. A
few among them are being operated under the Islamic rules and regulations. However,
most of them practise in a dual system. Since Islamic finance is closely related to religion,
it is different from conventional banking in many aspects. The main difference is that
Islamic banks do not pay or receive interest. To satisfy the Islamic principles, Banks and
financial institutions have developed new instruments satisfying the Shariah requirements
and regulations. Through this study we find that the products offered by Islamic Banks are
not the best solutions that capture the principles of the Shariah rules. Further, to reach the
ideal financing solutions, banks need to move away from the mark-up products to equitybased
solutions. With regard to the situation in Oman, political control restricts banks from
offering interest-free products. Nevertheless, banks are trying to find ways to overcome
this restriction.
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