Kampala- Cabinet delay to see through legislation that will allow the banking industry introduce several new products and enable the players tap into more innovative ways of doing business is frustrating progress.
Despite pronouncing itself on the matter years ago, government is still dragging its feet over legislations that will allow banking industry players widen their services to encompass emerging development.
The banking industry leadership wants the policy makers to consider speeding up passing of such legislations so that the industry players can launch them after years of preparation.
In his speech at the joint annual bankers’ dinner in Kampala last week, Uganda Bankers’ Association (UBA) chairman Fabian Kasi said: “UBA hopes that we continue to get laws and regulations that are conducive to effective banking environment, and to this end we would like to urge policy makers to fast track the passing of laws that will enable provision of more banking products.”
He added: “The law once passed will allow products such as bancassurance and Islamic banking to be instituted and will also enable increased financial inclusion through agency banking. Additionally, as we move into integration of the East African Community, there is need to align all banking regulations.”
Currently, Uganda does not have any licenced financial institutions providing such products, among them Islamic financial products and services because the existing legal framework contains sections which prohibit the smooth operation of Islamic banking.
To address this constraint, and others being fronted by the bankers, Bank of Uganda (BoU) proposed amendments to the Financial Institutions Act, 2004 to pave way for what the bankers are asking.
The proposed amendments were approved by Cabinet and now await endorsement by Parliament.
Speaking particularly on Islamic banking, an earlier statement, BoU mentioned that it looks forward to the commencement of Islamic Banking because it would be a positive compliment to conventional banking by expanding the range of products available to the public and enhancing competition in the sector.
According to the central bank, this would support its objectives of promoting financial Inclusion and deepening the financial sector.
Like the other products, once the amendments are passed, BoU will be able to licence fully fledged Islamic banks or conventional banks operating Islamic windows.