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Parliament asked to allow Central Bank to amend the law on Islamic banking

 

By Prossy Nandudu

 

 Financial experts have called on Parliament to allow Bank of Uganda and the ministry of Finance make amendments on the Islamic banking Law for the growth of the financial sector in Uganda.

 

If parliament continues to keep the law in Parliament, Uganda is bound to loose investors from Islamic countries to neighbours such as Kenya, Rwanda and Tanzania.

 

The call was made by Grace Ndyareeba, a financial consultant with GN Associates and former risk manager at Bank of Uganda, in an interview at his office in Kamwokya.

 

 “If parliament continues to cling on the law, they will be raring the growth of the financial sector which is critical for the growth of the financial sector in a country,” said Ndyareeba.

 

He also added that what is left are simple amendments that can be done by the central bank and then laid on table at Parliament by the finance minister.

 

Islamic banking also as a banking activity that is consistent with the principles of the Islamic law (Sharia) and its practical application through the development of Islamic economics

 

Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for money loans.

Investing in businesses that provide goods or services considered contrary to Islamic principles is also regarded as sinful and prohibited.

 

“The more we delay, the more we loose potential investors from the Islamic world to Kenya, and Tanzania which have already implemented the law and doing quite well,” said Ndyareeba.

 

He explained that Islamic banking is not for Muslims a lone as evidenced in Indonesia, where 97% of the population is Muslims but Islamic banking assets are only 3% compared to other financial institutions.

 

Recently the Governor bank of Uganda Emmanuel Tumusiime Mutebile revealed that central bank  has  proposed amendments to the Financial Institutions Act, 2004, to permit the licensing of, and transacting by financial institutions in Islamic banking in Uganda.

The governor said that that the current regulatory regime does not permit financial institutions to engage in Islamic banking.

Mutebile added that Bank of Uganda has already proposed amendments to the Financial Institutions Act, 2004, to permit the licensing of, and transacting by financial institutions in Islamic banking in Uganda so as to close this gap.

“The amendment will bring Uganda in line with other EAC member countries that have licensed Islamic banking and finance. It will increase the depth, breadth and range of finance products bank customers can use to access banking services,” said the governor’s Eid-El-Fitri Message to the Islamic community recently.

Ends.