Kampala- The Ministry of Finance has said the framework for the implementation of Islamic banking in the country has been developed and will be operational in October.
Addressing the business community during the third annual Uganda Revenue Authority (URA) budget breakfast meeting yesterday, Mr Patrick Ocailap the Deputy Secretary to the Treasury, said government is introducing Islamic banking to provide cheap credit.
“Parliament passed the Islamic Banking law, but it lacked guidelines of how to implement it, but we have set them up and we hope that by October, Islamic banking will be operational,” Mr Ocailap said.
He said government has also negotiated for $20 million (Shs76 billion) from the African Development Bank to capitalise Uganda Development Bank so that Ugandans can have cheap access to capital equipment to mechanise agriculture and promote value addition.
Asked to explain the benefits of Islamic banking, Mr Fred Muhumuza, an economist, said it may not be so effective as the case in Kenya and Tanzania because it is based on Sharia law.
“They believe that instead of paying interest on the loan, you should share the profits that accrue from the loan and as you know our people, declaring profits is a very big challenge most of the time,” Mr Muhumuza said.
However, Mr Jamil Ndyanga, the senior relationship manager at Tropical Bank Limited, one of the institutions to implement Islamic banking, disregarded the claim that it failed in Kenya, saying it is part of the negative perception attached to it.
Ms Doris Akol, the URA commissioner general, said the post budget conferences are meant to educate the business community about areas where opportunities are in the new budget so that they can make economic decisions which will not conflict with the new tax measures.
“Instead of importing the heavily taxed minibuses for those in the transport business, go for the coasters whose taxes are lower but you remain in the same business,” Ms Akol said.
She also advised traders in the agricultural sector to invest in setting up processing factories because agriculture is not being taxed.