Salaam Bank Uganda Ltd has become the first commercial bank to acquire a license to offer Islamic banking services in Uganda.
Salaam Bank is a Ugandan subsidiary of Salaam African Bank of Djibouti, through Top Finance Bank which it acquired in August last year. Salaam Bank’s launch in Uganda followed the expansion in Asia, particularly in Malaysia as well as in Ethiopia and Kenya.
The issuance of the Islamic Banking licence in Uganda follows the signing of the Financial Institutions (Amendment) Act 2023 last month by President Yoweri Museveni, which paved the way for the introduction of Islamic Banking in Uganda.
Islamic Banking is a phrase used to refer to the banking services that follow Islamic principles, which bar the charging of interest on a loan. Instead, it provides for the lender to take interest in the beneficiary project and at the end of it, share in the profits or losses of the project.
“The licenses in Uganda will now allow Ugandan nationals to enjoy 100 per cent Islamic financial products, allowing the introduction of quality products and services to the Ugandan banking market,” said Salaam management.
Apart from the reduced risk of failure to pay back, enterprises get an additional advantage of expert or technical contribution by the lender who ensures the success of the credit.
Micheal Atingi-Ego, the Deputy Governor of the Bank of Uganda said that the Central Bank was committed to providing oversight and support to Salaam Bank Limited as it embarks on this new journey. “Islamic banking has the potential to make a significant contribution to the development of Uganda’s financial sector,” Dr Atingi-Ego said.
Islamic banking, also known as Sharia-compliant or Islamic finance, is a financial system that operates under principles of Islamic law, known as Sharia.
The introduction of Islamic banking marks a pivotal moment in Uganda’s financial landscape, unlocking fresh funding avenues for businesses and individuals, thereby fostering financial inclusion.