A section of Muslim leaders used the Eid al-Adha prayers on Tuesday, 20 July 2021, to urge government to fast track the implementation of Islamic banking.

According to the Muslims, Islamic banking, which operates in line with Sharia law that prohibits the charging of interest and speculation, would help businesses that are currently badly affected by the Covid-19 lockdown.

The Secretary General of the Uganda Muslim Supreme Council, Alhajji Ramadhan Mugalu, said Islamic banking is provided for in the Financial Institutions (Amendment) Act, 2016 but wondered why government has not implemented it.

The Islamic leadership has in the past accused the Central Bank of deliberating frustrating the final lap of establishing Islamic Banking.

But Finance Minister Matia Kasaija told Parliament early this year that implementation of Islamic Banking was being delayed by a law, which requires that there must be a council that will govern it. He said that they have been trying to look for qualified people to sit on the Council but Uganda doesn’t have that kind of personnel.

“We thought about recruiting from abroad. But I think now, we are going to amend the law so that we remove that provision because it will not make much difference. I will be coming to parliament any moment to amend the law so that we remove that provision then we move ahead with Islamic banking,” said Kasaija.

 The law also provides for the establishment of the Central Sharia Advisory Board in the Central Bank.

But Mugalu on Tuesday said the Muslim community has the necessary experts to sit on the Council to govern Islamic banking but the Bank of Uganda is still dragging its feet.

But while addressing a stakeholders meeting in Masaka in July 2019, former BoU deputy governor Louis Kasekende, said, the Central Bank had been vetting three financial institutions, including two foreign and one local bank, that had applied to offer Islamic banking in Uganda.

In 2019, while conducting the their annual general meeting, bishops under Uganda Joint Christian Council (UJCC), which brings together Anglicans, Catholics and Orthodox churches, kicked up a storm after they resolved to lobby government to stay the creation of Islamic Banking system, arguing that they do not understand its motive and how it works.

Islamic banking is a system based on the Islamic economic guidelines in as far as the Sharia law is concerned. Under this system, the banks make profits through fairness participation in that the borrower gives the bank a share in their profits as opposed to paying interest like it is the case in conventional banking.