Uganda: President Museveni considers launching Islamic banking as popularity surges
Authorities at Ecobank Uganda are contemplating introducing Islamic banking services this year. This development comes ahead of President Yoweri Museveni’s scheduled official launch of Islamic banking in the country, slated for Wednesday.
The anticipated launch, to be held at Kololo ceremonial grounds, is a collaborative effort between Ecobank Uganda and the Office of the National Chairman, led by Hadijah Namyalo. Islamic banking, which operates in accordance with the Shariah law, was formally operationalized in Uganda in September of last year.
Spearheading the Islamic banking initiative is Salaam Bank Ltd, a subsidiary of Djibouti-based Salaam Group, which obtained an Islamic banking license from the Bank of Uganda (BOU) in the previous year. Salaam Bank Ltd’s Chief Executive Officer, Michael Mande, disclosed to this publication that both Muslims and non-Muslims have warmly embraced this banking model.
Mande noted, “For Muslims, the uptake has been good because they had never gotten this experience which is exactly in line with the Islamic principles, and the non-Muslims have understood the values of this banking.”
Currently, Salaam Bank Ltd is offering a range of products aligned with Islamic finance principles. One such product, described as debt-like financing structures, operates under the Murabahah framework. Under Murabahah, the bank purchases an asset on behalf of the customer and subsequently sells it to the customer at a markup.
Explaining further, Mande elaborated that in Murabahah transactions, the bank and the customer enter into a sales contract at a profit mark-up. Customers, whether Muslim or non-Muslim, can apply for financing to acquire assets such as land or cars.
The bank then purchases the desired property before reselling it to the customer at a price higher than the acquisition cost, with payment deferred according to an agreed-upon schedule, thus generating a profit.
