Uganda’s government has moved to pass legislation allowing Islamic banking and the immediate licensing of Salaam Bank signaling a growing demand for Sharia-compliant financial services and products.
According to the East African, Saalam Bank, a subsidiary of a Djibouti-based lender that goes by the same name officially opened its doors in Kampala last month highlighting expert remarks which cited a growing niche in need of such services.
Uganda now joins other regional countries like Kenya and Tanzania which have taken the same route by adopting financial services and products that are Sharia compliant in their country.
In Sub-Saharan Africa the list of countries adopting Islamic banking continues to grow with Nigeria, Egypt, Gambia, Senegal, Ethiopia, and South Africa all making the list.
Uganda President Yoweri Museveni recently launched the operations of Salaam Bank, The first Islamic lender in the country.
Salaam, which has operations in Kenya, Somalia, and Djibouti, received an operating license from the Bank of Uganda (BoU) late last year after the Ugandan Parliament passed a Bill allowing Islamic banking in the country.
According to Nanyang Technical University, the African Islamic Finance market is worth $375 billion.
With a Muslim Population of over 250 million coupled with a growing need to fund several infrastructural development projects, the Islamic finance industry is ready to maximize the huge potential found in the continent.
Islamic finance extends beyond banking to cover many other financial areas, including insurance (Takaful), capital markets, investment funds, and other financial products and services.
Islamic Shariah principles restrict the payment or acceptance of interest charges or ‘riba’ for the lending and acceptance of money. This means loans from an Islamic bank come with no interest.
Sharia-compliant financial institutions operate businesses in 72 countries around the world and Islamic banking remains the largest Islamic finance segment with a 70 percent share of the Islamic finance market.
After Islamic Banking we have other fledgling sectors under Islamic finance such as Sukuk (Islamic bonds) at 18 percent, Islamic funds at 4 percent, and Insurance at 2% of the overall Islamic finance sector.