Overview:
Unlike conventional interest-based loans, Murabaha financing allows a financial institution to purchase an asset and resell it at a pre-agreed profit margin, with repayments made in instalments.
The Uganda Development Bank Limited (UDBL) has secured a USD 30 million (UGX 104 billion) financing facility from the Islamic Corporation for the Development of the Private Sector (ICD), marking the institution’s first-ever Line of Finance in Uganda and East Africa.
The facility, structured under a long-term Commodity Murabaha arrangement, will expand access to medium- and long-term financing for Small and Medium Enterprises (SMEs), enabling investments in sectors critical to Uganda’s growth, including agribusiness, manufacturing, education, healthcare, and fixed assets such as land, buildings, and machinery.
Unlike conventional interest-based loans, Murabaha financing allows a financial institution to purchase an asset and resell it at a pre-agreed profit margin, with repayments made in instalments. The model provides Shariah-compliant, ethical access to capital, offering a practical alternative for Ugandan businesses seeking sustainable financing.
Speaking on the partnership, UDBL emphasized that the facility will spur business expansion, create jobs, and support sustainable economic development, strengthening the capacity of local SMEs to invest in productivity-enhancing assets.
“This financing is a landmark step for Uganda’s private sector,” said a UDBL spokesperson. “It opens doors for innovative funding approaches and sets a precedent for future collaborations between ICD and local financial institutions.”
ICD’s support aligns with its mission to catalyse private sector investment in member countries while advancing Uganda’s national development priorities and the Sustainable Development Goals (SDGs). By broadening access to long-term, ethical financing, the initiative is expected to enhance Uganda’s financial ecosystem and encourage resilient, inclusive growth across the country.