What you need to know:
High interest rates: Commercial banks in the country are synonymous with high interest rates drawing a public outcry to have the interest rates lowered.
Finance Minister Maria Kiwanuka has asked groups pushing for the establishment of Islamic Banking in the country to lobby legislators if the Shariah-based banking is to be realised soon.
“We realised the need for this bank and as cabinet, we drafted the Bill and sent it to Parliament. You must lobby members of Parliament,” Ms Kiwanuka said early this week at a seminar organised by Uganda National Chamber of Commerce and Industry in Kampala aimed at creating awareness on how the bank works.
The basis for Islamic banking, according to Ms Rahma Hassan Hersi, an Islamic finance lawyer, lies in the principles of the Sharia laws drawn from the Quran.
“Interests are forbidden. Wealth can only be generated through legitimate trade and investment in assets….both parties take risks and share profits,” Ms Hersi said.
Ms Kiwanuka, however, clarified that both conventional and Islamic banking will complement each other and there should be no fears that interest driven banks will collapse. She also said they are working on guidelines on who qualifies for the loan.
Ms Oliver Kigongo, the president of Uganda National Chamber of Commerce and Industry, said there is money in pipeline from Arab countries as soon as an enabling legal frame work is finalised.
The Daily Monitor understands that Islamic University in Uganda has started Islamic finance modules to equip students with relevant knowledge on how this banking works.
Bank of Uganda has been sending officials to countries like Malaysia, United Kingdom and Arab countries where Islamic banking exists, to get exposure on the same.
In East Africa, Kenya, Tanzania and Rwanda have already embraced Islamic banking.
The Daily Monitor could not establish when the Bill will come on the floor of Parliament as the clerk, Ms Jane Kibirige, could not pick our calls.
islamic banking and principles under which it works
Islamic banking is banking or banking activity that is consistent with the principles of Sharia (Islamic religious law) and its practical application through the development of Islamic economics.
As such, a more correct term for ‘Islamic banking’ is ‘Sharia compliant finance’.
Sharia prohibits acceptance of specific interest or fees for loans whether the payment is fixed or floating. Investment in businesses that provide goods or services considered contrary to Islamic principles (for instance pork or alcohol) is also prohibited.
By 2009, there were over $822 billion assets being managed in more than 300 banks and 250 mutual funds around the world complying with Islamic principles.