The banking sector in Oman is still developing and undergoing transformation and the country expands financial services in a bid to diversify its economy and reduce reliance on oil revenues. The banking industry is a significant driver of the small and medium enterprise sector in the country, which is expected to spearhead the economic diversification initiative. However, the Omani banking sector is challenges by the market forces, such as, increased competition, slow economic growths globally, and slumped oil prices. Therefore, leadership play a critical role in ensuring that financial institutions and the industry navigates these complex challenges successfully and growth is sustained in the long-term. The ensuing report dwells on the banking sector in Oman and the Alizz Islamic bank as one of the major financial institutions in the country. Issues related to organizational structure, leadership and organizational change are discussed.

1. Organizational Structure and Characteristics

1a. Seven Structures and Systems Present at Alizz Islamic Bank

The organization mindset-thinking structure and system at Alizz Islamic Bank is characterized by authoritarian management (organizational mindset 4 – blue). This reflects the management/leadership style in the organization, which is illustrated in the organizational audits presented in table 1. The core mindset thinking of the organization is assessed along three scales, which are importance, power or influence, and direction/intensity of change.

Table 1. Core mindset-thinking audit of Alizz Islamic Bank

Attribute	Factors	Score	Total score	Priority rank
Corporate Success
Importance	Critical/minimal importance	7
Power or influence	Strong & influential/ weak and insignificant	9
Direction/intensity of change	On the increase/on the decrease	6
			22	2
Tribal-kingship Bonds
	Critical/minimal importance	9
	Strong & influential/ weak and insignificant	9
	On the increase/on the decrease	6
			24	1
Power-Force Bonds
Importance	Critical/minimal importance	4
Power or influence	Strong & influential/ weak and insignificant	4
Direction/intensity of change	On the increase/on the decrease	4
			12	7
Traditional-Purpose Bonds
Importance	Critical/minimal importance	7
Power or influence	Strong & influential/ weak and insignificant	8
Direction/intensity of change	On the increase/on the decrease	6
			21	3
Achievement-Innovative Bonds
Importance	Critical/minimal importance	6
Power or influence	Strong & influential/ weak and insignificant	6
Direction/intensity of change	On the increase/on the decrease	8
			20	4
Sustainable-Sharing Bonds
Importance	Critical/minimal importance	6
Power or influence	Strong & influential/ weak and insignificant	7
Direction/intensity of change	On the increase/on the decrease	6
			19	5
Complex-Systems Bonds
Importance	Critical/minimal importance	5
Power or influence	Strong & influential/ weak and insignificant	6
Direction/intensity of change	On the increase/on the decrease	6

Total score/rank	17	6

In this respect, the core mindset-thinking at Alizz Islamic Bank prioritizes tribal-kingship bonds the most and power-force bonds the least. However, the bank ranks corporate success highly, which indicates its willingness to adopt new strategies that would deliver a competitive advantage in the banking sector. Notably, the organizational mindset at the bank demonstrates its intent on providing easy and convenient banking services to its clients in a complex and fast-evolving financial sector environment through decisions made by the top management. This is consistent with level 4 in Graves Model, which is characterized by bureaucracy, formal structures, and order, which are established and maintained through continuous monitoring to enhance efficiency. In addition, using the spiral dynamics model, the organization is in the TruthForce stage and rapidly transiting towards the StriveDrive wave, which is a dominant phase in the banking industry nationally (Beck & Cowan, 2014).

The management/leadership mindset of the bank correlates with that of the country, considering the company leadership is appointed by the chairperson of the board of directors, His Highness Sayyid Taimur bin As’ad Al Said, a high ranking member of the Sultanic family. In this regard, the country exhibits an authoritarian management mindset (mamnagemetn/leadership mindset blue). Oman is an absolute monarch ruled by a Sultan as the head of state and government, in charge of the finance, foreign affairs and defense ministries, and the supreme commander of the country’s armed forces. With leadership in the country being hereditary, it is passed on to heirs or appointees, although professional management is being infused into the dominant Arabic cultural orientation. In this respect, the collectivism culture that comes with strong family ties is still visible in the organization’s adoption of the Islamic form of banking and the country’s leadership support for this banking system. Nonetheless, the country is changing its national culture to improve its fit with the global corporate culture to enable Oman become a significant participant in the global value chain of services.

1b. Leadership Value systems and structures at Alizz Islamic Bank

The leadership value systems and structures at Alizz Islamic Bank are characterized by the leadership mindset 4 (blue). Based on the leadership value systems (LVS) theory, the life conditions informing the leadership mindset at Alizz Islamic Bank is the information and knowledge era (D) in which the associated philosophy is premised on life conditions that support the planned and purpose driven mentality (Grisby, 2016). Specifically, leaders in the bank are driven by a master plan as the central idea, which in this case, is the Oman Vision 2040 that aspires to develop creative individuals and create an economy that is globally competitive (Oman 2040). In exercising the professional bureaucrat leadership and management style, leaders at Alizz Islamic Bank are chosen based on their status or class, have a strong sense of purpose and demand group discipline, in conformity to Arabic traditions and the Islamic shariah religion (Grisby, 2016). This explains why the management is focuses on developing a successful Islamic bank that concentrates on shariah banking principles.

This leadership mindset is evident in the recruitment strategy employed by the bank. For instance, the bank focuses of recruiting ambitious and highly talented Omanis, who are groomed for future leadership positions in the organization through training and mentoring. Consequently, the bank has achieved a 90.3% Omanization ratio, which advances the omnization policy of the country and Oman Vision 2040. In addition, the bank has a comprehensive corporate social responsibility (CSR) programme aimed at uplifting the wellbeing of Omanis. For instance, through the Alizz Cares initiative, the bank promotes education across the country by donating books to every child to ensure that Omani children develop a reading culture early (Alizz Islamic Bank, 2020). For these reasons, has a highly ranked by the global banking and finance Award, such that it received the Best CSR Bank in Oman Award in 2017 (Alizz Islamic Bank, 2019).

1c. Differences with local and global competitors

The company is one of the two Islamic banks in Oman and is therefore at the forefront in establishing the banking system in the country where the model is still in its nascent stages of development. The company lags behind some of the local banks that were established earlier such as the National Bank of Oman. However, it is at the same developmental level with its peer, Bank Nizwa, the other standalone Islamic bank in the country, considering that was established at the same time, in 2012.

1d. Effect of differences on differentiation

Alizz Islamic Bank has positioned itself as a successful Islamic bank despite its relative small size and young history. Although it is one of the two Islamic banks in the country, it competes favorably with conventional banks that have wider service portfolios. Moreover, it is focusing on providing mobile solutions of Islamic banking to all Omanis. In this regard, Alizz Islamic bank is undertaking an aggressive digitization transformation, especially in risk management, considering the Islamic banking is prone to several risks such as cybersecurity and proper assessment of assets, due to its Islamic banking model.

2. Banking Sector

2a. Evolution of the Omani banking sector

The Sultanate of Oman has 17 banks comprising local and international commercial banks and two specialized banks. The sector is regulated by the Central Bank of Oman, which is mandated to conduct bank licensing, interest rate monitoring, issuance of money, and availing development bonds. The Omani banking sector is considered the smallest among the GCC countries because its assets are worth $73 billion compared to the Saudis $580 billion and the emirate $630 billion banking industries.

The 1974 banking law in Oman that established the central bank of Oman ushered in the transformation of the banking industry in the country. It facilitated the increase of local banks and allowed the entry of foreign-owned banks into the sultanate. This law effectively ended the dominance of the Brutish Bank of the Middle East, Commercial Bank of Oman, and National Bank of Oman. Currently, the country has the highest banking density in the region of 16 branched per 100,000 people compared to the UAE’s 11.9 and Saudi Arabia’s 9.2 branched for every 100,000 people. A significant transformation has been through the royal directive of 2011, which ushered in shariah-compliant banking services and the establishment of Islamic banks in the country. Currently, banks in Oman operate as either standalone Islamic banks or as conventional banks offering shariah-compliant services.

An audit of the Omani mindset and culture can help explain the state and changes in the banking sector in the country. Table 2 presents the country and cultural audit of Oman and compares it with that of the United States. In this case, the United States is used for comparison because of its advances and well-established banking sector, which is often used as the gold-standard by many countries across the world.

Table 2. Country audit of Oman and the United States

Attribute (out of 10)	Score
	Oman	U.S.
Can do optimism/hopeless-pessimism	6	9
Decision made by few/decision made by many	8	8
New and fresh/old and stale	5	8
National or ethnic centric/world or global	6	8
Abundant resources/limited resources	7	8
Conflict or violence prone/peaceful or harmony prone	5	8
Individuals come first/groups or collectiveness comes first	7	8
Deeply spiritual/highly materialistic	7	8
Cohesive and united/fragment and chaotic	5	3
Exciting and energetic/passive and restrained	5	8
Rigid and closed/flexible and open	5	5
Fearful and constrained/hopeful and free	5	3
Total score (120)	73	84

From the country audit, Oman scores 73 out of 120 in the 12 different attributes. However, this score is much lower than that of the United States, which scores 84 out of 120. Nonetheless, the Omani banking sector is evolving to conform to international standards and best practices, despite championing the Islamic banking model, whose demand is rising in the country and across the world. Notably, the Central Bank of Oman (CBO) is spearheading the transformation of the banking sector by improving the regulatory framework on the country’s banking business environment. For instance, it requires that banks adopt the International Financial Reporting Standards 9 (IFRS 9) to replace the international accounting standards 39 (IAS 39) to improve the reporting of financial assets and liabilities (KPMG, 2019). Banks in the country are also being encouraged to adopt digital technologies to improve banking services and engage clients. To this end, CBO is encouraging banks to adopt customer identity and management access (CIAM) to improve customer relationships. Consequently, the banking sector in the country is growing amid slowed growth globally, with the top 8 banks growing their net profits by 11.5% in 2018 (KPMG, 2019).

In turn, the leadership mindset in the Omani banking sector is progressing towards the strategic enterprise mindset in which the life conditions complexity is focused on technology and finance (Leadership mindset 5 – orange). In this respect, the banks in the country are recruiting highly skilled bankers with an international experience to champion their institutions towards organizational success through entrepreneurship and innovation. This is evident in the innovative products emerging in the Islamic banks in the country, such as the sukuk, which is a shariah compliant bond (KPMG, 2019).

2b. Difference to local and global competitors

The main competitors of Alizz Islamic Bank are Bank Muscat, Bank Dhofar, Bank Nizwa, and Oman Arab Bank, which are established locally. Bank of Beirut, Standard Chartered Bank and First Abu Dhabi Bank are three of the seven international banks in the sultanate that compete with Alizz Islamic Bank. Currently, fierce competition exists between Islamic and conventional banks, and between banks and non-bank institutions such as the financing and leasing companies (FLCs). In this regard, in the Middle East, the Omani banking sector competes with that in Lebanon and United Arab Emirates. The Islamic banking sector in Oman is the youngest in the Middle East, and therefore, least developed. For instance, Islamic banking was established in the UAE and Lebanon in 1975 and 2004 respectively, compared to 2011 in Oman (Sujud & Hachem, 2018). In this respect, while Oman has 2 full-fledged Islamic banks, Lebanon and the UAE have 5 and 8 respectively.

2c. Effect of differences on differentiation

The banking sector is still in its developmental stages with regulations and rules still being formulated to suit the environment in the country and globally. In this regard, the sector is still domesticating many internationally acclaimed good practices, such as the International Financial Reporting Standards (IFRS) protocols and the Basel III requirements. This means that the banking sector is at the strategic stage and rapidly moving towards the network stage to keep abreast with the international standards. Notably, the leadership in banking industry is business establishing a stable banking and financial services environment to attract more customers, spur national development, and protect the Omani economy from external shocks.

The banking sector in Oman lags behind that of its neighbors. For instance, Iran, Qatar, and the United Arab Emirates, have banks with branches in the country, which compete directly with the indigenous banks. These competitors operate in Islamic and Arabic environments, and are therefore, familiar with the banking environment in Oman, at least from a cultural, social, and political perspective. This places the Omani banking Industry at a disadvantage because the regional banks established in the neighboring countries offer fierce competition to the relatively young domestic banks in Oman. Similarly, the international banks, such as the Standard Chartered Bank, have a robust global presence, and therefore can dominate the international financial transactions conducted in Oman. However, the local Omani Banks have an advantage that differentiates them from their competitors. Specifically, they are closely intertwined with the Omani government through shareholding, which enables them to navigate the political and regulatory hurdles in the country. Moreover, although Omani banking sector is anticipating the financial action task force (FATTF) evaluation in 2021 and the phasing out of the London Interbank Offered Rate (LIBOR), to be replaced by risk-free benchmarks (RFRs), it still has shortfalls in experienced and highly-skilled personnel to spearhead these transitions. However, while the Omani banking sector is progressing from the blue organizational/leadership mindset system to the orange one, as mentioned earlier, it needs to evolve into the green mindset system. This would enable Omani banks to compete favorably in the region by driving the digitization agenda and help the company achieve the Oman vision 2040. Notably, the Omani banking can prepare for the future by digitizing its services, innovating digital products, and expanding internationally, which is why it is lagging behind that in Lebanon and UAE.

3. Organization’s Transformation and Growth

3a. Changes in the Omani banking sector

The banking sector is undergoing several significant changes that are disrupting conventional operations. For instance, advances in information and communication technologies, and the proliferation of mobile technologies are shifting the banking services from physical branches to mobile banking. Moreover, banks in the country are exploring merger possibilities in the realization of the disadvantage associated with being small banks amid large and well-established international competitors.

The management system thinking at Alizz Islamic Bank is still premised on professional bureaucracy (color blue – mindset 4), although there are indications it is transforming towards entrepreneurship and innovativeness (color orange – mindset 5). For instance, Oman has established a shariah board in collaboration with other countries in the region and Asia, such as Pakistan, Indonesia, Malaysia, and Bahrain to improve and share good shariah banking practices (KPMG, 2019). In addition, CBO issued circular BM 1153, which outlined the specific guidelines of combating fraud, as recommended by the Basel committee of banking supervision (BCBS) in its review of the principles for the sound management of operational risk (BCBS 292) (KPMG, 2019). Moreover, banking leaders and managers have prioritized the use of modern technology by implementing digital and mobile banking solutions to increase customer reach, enhance banking experience, and prepare for international markets. These are indications that the banking sector in Oman is endeavoring to globalize its organizational mindset by joining the international financial services community.

3b. Involvement of Alizz Islamic bank in the Omani banking sector transformations

Alizz Islamic Bank is lagging in the banking industry because it is focused on providing Islamic banking services alone while other banks in the country, region and globally, are offering both Islamic and conventional banking services. This is disadvantageous to the firm in an environment where Islamic banks operate alongside conventional banks and large global banks have Islamic banking services. Besides, Alizz Islamic Bank is engaging highly-skilled and vastly-experienced senior management staff, as demonstrated by the appointment of Venkatesh Kallur as the chief risk officer, who is a multilingual career banker with 35 years of experience working in six countries across three continents, and Salaam Said Al Shaksy as the CEO who has worked over 22 years in international banks, and more recently, won the Top CEO Award 2019, and is credited for driving the bank to make its first profit in 2018. This demonstrates that the bank recognizes its deficient management team because there are few bank employees with sufficient experience and skills to take up the leadership at the organization.

Moreover, Alizz Islamic Bank is exploring a merger with Oman Arab Bank (OAB), which would convert the organization from an open to a closed joint-stock company (Times of Oman, 2020). This illustrates the recognition of the capital, size, and market share limitations being experienced by the bank in its present configuration.

4. Organization’s Challenges and Recommendations

4a. The three big issues faced by Alizz Islamic Bank

Alizz Islamic Bank experiences several challenges that stifle its growth and profitability. Firstly, it is a small bank, and therefore, disadvantaged when competing with larger well-established rivals that have a regional and global presence because of its small financial capabilities. Secondly, the bank provides narrow services targeting a very specific market in the country. As a standalone Islamic bank, the organization targets Muslim customers mainly, in an environment that is fast changing and expanding, and thus requiring diversified financial services. Thirdly, Alizz Islamic Bank is challenged by the high proportion of real estate business, which exposes the bank to liquidity, credit, market and operational risks because of the extensive use of asset-based securities to back financing customer. Therefore, risk management remains a big challenge in the company.

4b. Key actions Alizz Islamic Bank needs to take to place it on a path of sustainable success

Alizz Islamic Bank can address these challenges in several ways. Firstly, it is recommended that the bank enhances its leadership capabilities by changing its configuration to a bank that offers both Islamic and conventional banking services. Already, it is addressing the challenges that come with a small size and asset base by considering a merger with Oman Arab Bank. This will not only increase the capital reserves of the company but will also expand the Islamic banking services when the Islamic banking window in OAB is integrated with the Islamic banking services at Alizz Islamic Bank. More importantly, such a merger would provide a fertile ground for grooming future leaders by providing them diverse banking experience and mentoring them using the highly-skilled and vastly-experienced senior executives.

Secondly, Aliss Islamic Bank should encourage its staff to innovate new banking products to expand its financial services portfolio. This would instill a culture of innovation and entrepreneurship, which is critical in the grooming of the future leaders of the bank. Moreover, it would promote the learning culture in the firm, which would help create leaders that can solve emerging customer problems as they emerge and respond to global trends promptly and creatively.

Thirdly, it is recommended that the bank expands its staff training program to include leadership, mentorship, and coaching components. This would equip the newly-hired highly talented and ambitious employees with the leadership skills needed to lead the company into the future. In this regard, the bank would have a large cohort of employees that can take up leadership positions in the firm.

5. Personal Leadership Capabilities Evaluation

I have a sound academic foundation in leadership from my post graduate course in business management. In addition, working at Alizz Islamic Bank has allowed me to put leadership theory into practice. I prefer working collaboratively with colleagues and involving them in decision-making because I believe that this enhances the quality of decisions I make. I have come to value the easy flow of information among pertinent stakeholders to facilitate the buy-in of decisions made and reduce resistance. Moreover, I prefer speedy response to challenges due to the rapidly-changing environment and the deleterious effects of inactivity and indecisiveness in the financial sector. These attributes were revealed by the self-analysis summarized in table 3.

Table 3. Self-audit

Self-description	Thinking Mindset	Choice
Spunky, risky, daring, often rebellious	Brown
Self-reliant, at anonymous, flexible with multiple interests	Orange
Loyal, dependable, order with firm convictions and beliefs	Blue
Ambitious, competitive, a ‘winner’ with strong aspirations	Red
Warm, open, inclusive with focus on feelings and community	Green
Superstitious, tribal, with family group clan rituals	Purple
Global, integrated, lens M harmonises for the good of all	Beige

From the self-evaluation of my leadership mindset system, I fell into the blue mindset. The blue mindset thinking system is appropriate for holding a senior management position in the banking sector where professionalism and hierarchical order are highly valued. However, I aspire to be in the green mindset thinking category to embrace the technological realities of the contemporary global banking sector and become a global banking professional.

In this respect, I need to capitalize on my ambition, commitment to self-improvement, and a strong desire to obtain a decent return on academic investment, to drive my professional development agenda, in conformity to the leadership development mindsets (Gleeson, 2018). Specifically, I need to improve my competence in emerging banking technologies, high-performing team-management skills, and constructive use of regular market intelligence and feedback for speedy decision-making. This requires I attend coaching and mentoring sessions provided by experienced and highly-skilled senior executives in the banking industry.

Conclusion

Although the banking sector in Oman is still in its nascent stages, it has developed rapidly to make the country the most densely served with bank branches in the region. However, the industry is far from being saturated because it is served by only 17 banks, with most of them focusing of providing Islamic service banking services alongside conventional banking. Although Alizz Islamic Bank, the Omani banking industry, and myself are in the blue organizational/leadership mindset thinking system, I need to transcend to the green category to facilitate the changes that would drive Alizz Islamic Bank into the future sustainably.

References

Alizz Islamic Bank (2019). Excelling for 5 years: Annual Report 2018. Retrieved from https://islamicmarkets.com/publications/alizz-islamic-bank-annual-report-2018.

Alizz Islamic Bank (2020). Alizz Islamic Bank refurbishes reading and entertainment room for children at Khoula Hospital. Retrieved from https://alizzislamic.com/Media-Centre/Press-Releases-Details/snmid/628/snmida/631/snid/2249/sname/ALIZZ-ISLAMIC-BANK-REFURBISHES-READING-AND-ENTERTAINMENT-ROOM-FOR-CHILDREN-AT-KHOULA-HOSPITAL.

Beck, D. E., & Cowan, C. C. (2014). Spiral dynamics: Mastering values, leadership and change. Hoboken, NJ: John Wiley & Sons.

Gates, J, Graddy, J. & Lindekens, S. (2017). How leaders improve: A playbook of leaders who want to get better now. Santa Barbara: Praeger.

Gleeson, B. (2018). 7 mindsets necessary for successful leadership development. Forbes. Retrieved from https://www.forbes.com/sites/brentgleeson/2018/05/31/7-mindsets-necessary-for-successful-leadership-development/#1dde7cd750d3.

GP Strategies (2019). Leadership mindsets: The thoughts and actions of successful leaders. Retrieved from http://www.gpstrategies.com/wp-content/uploads/2019/10/ResRpt-LeadershipMindsets-10.10.19OLopt.pdf.

Grisby, J. (2016). The 6 different mindsets of leadership. Chartered Management Institute. Retrieved from http://www.managers.org.uk/insights/news/2016/october/the-6-different-mindsets-of-leadership.

Impelsys Inc. (2018). Alizz Islamic Bank partners with Impelsys to enhance digital learning courseware for its employees. Retrieved from https://www.openpr.com/news/1319522/alizz-islamic-bank-partners-with-impelsys-to-enhance-digital-learning-courseware-for-its-employees.html.

KPMG (2019). Oman banking perspectives 2019: A digital, regulated and sustainable future. Retrieved from https://assets.kpmg/content/dam/kpmg/om/pdf/oman-banking-perspectives.pdf.

Oman 2040 (2020). Oman Vision 2040. Supreme Council for Planning. Retrieved from https://www.2040.om/en/#Oman2040.

Sujud, H., & Hachem, B. (2018). Reality and future of Islamic banking in Lebanon. European Journal of Scientific Research, 149(4), 410-422.

Times of Oman (2020). OAB receives CBO approval in merger project with Alizz Islamic Bank. Retrieved from https://www.zawya.com/mena/en/markets/story/OAB_receives_CBO_approval_on_merger_project_with_Alizz_Islamic_Bank-SNG_172836566?utm_campaign=magnet&utm_source=article_page&utm_medium=related_articles.

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