‘Develop Islamic products’
Outgoing minister of Gender and Social Development, Mr Muruli Mukasa has advised commercial banks to urgently develop products to cater for Islamic Banking.
Kampala. Outgoing minister of Gender and Social Development, has advised commercial banks to urgently develop products to cater for Islamic Banking.
Mr Muruli Mukasa said last week that Islamic banking is set to revolutionise the banking sector in Uganda and it will be unwise for any bank not to embrace the new banking model.
“We have done everything to enable the operation of Islamic Banking. We have passed the law and the all the communities in Uganda have accepted this model of banking,” Mr Mukasa said at the annual Muslim Teachers Association meeting in Kampala.
After nearly six years of waiting, last year, Members of Parliament finally passed the amendments to the 2004 Financial Institutions Act.
The Financial Institutions (amendment) Bill 2015 paved way for the introduction of three new products: Islamic Banking, Bancassurance and Agency Banking, to Uganda’s banking sector.
But more Ugandans seem to be interested in Islamic Banking, which follows the principles of Shari’ah, where the institution does not charge interest on money taken out by a borrower. Many borrowers have lost property due to failure to pay the hefty loan interests hovering sometimes at 28 per cent.
But before Islamic Banking kicks off, Bank of Uganda will have to issue regulations that will guide commercial banks on how to manage the new form of banking.
Mr Mukasa also erases fears that Islamic Banking will drive commercial banking out of business saying the fears are unfounded since developed countries have also embraced it but still commercial banks thrive.
“It is also unfortunate that some people still have such fears. It is upto the banks but they should remember Uganda has accepted Islamic Banking,” Mr Mukasa added.
Countries where it is operational
Over 50 countries worldwide have adopted Islamic finance. They include: UK, USA, France, Switzerland, Canada and South Africa. The Central Bank of Kenya had since licenced two Islamic banks while National Bank of Rwanda had licenced an Islamic Microfinance Institution and Bank of
Tanzania had commercial banks offering Islamic financial services through windows.
Uganda has just finalised regulations allowing operations of Islamic Banking.
