CAIRO: Oman's Bank Nizwa, the sultanate's first Islamic bank, plans to attract some of the funds held abroad at other Gulf Islamic banks to grow during its first year of operations, its chief executive said.

"The amount of Omani money deposited in Islamic banks in the region, such as the UAE and Bahrain, is about 3.5 billion rials to 5bn rials ($9.1bn to $12.9bn)," Jamil Al Jaroudi said.

"Bank Nizwa aims to attract a share of these funds," he said. "Currently there is no precedent in Oman."

The money has been held in the region partly because of Oman's refusal to develop an Islamic finance industry, while other Gulf states have ramped up efforts in the sector during recent years.

The Omani central bank reversed that stance last year, granting licences to Bank Nizwa and Al Izz International Bank to offer Sharia-compliant services.

Legislation covering takaful and sukuk in Oman is expected to be finalised by the end of the third quarter of this year, officials said.

Mr Jaroudi expects the bank to open its doors by the end of the third quarter of 2012, focusing on the retail sector and supporting small and medium enterprises.

The lender raised 60m rials in an initial public offer of 40 per cent of its shares.

It plans initially to build its presence at home, opening three branches at first with five planned for the first year of operations, he added.

"There are no plans to expand overseas. In the beginning, we want to walk before we run," he said.

The bank faces a market where banking services have low take-up compared with the rest of the Gulf.

Mr Jaroudi said the penetration of banking services in Oman was roughly half the level seen in the Arab world and attributed it partly to reservations Omanis have in dealing with conventional banks.