Bank of Uganda issues first Islamic Banking licence

This was revealed at an event yesterday at BoU offices in Kampala in the presence of the Ministry of Finance's permanent secretary, secretary to the Treasury, and board member of BoU, Ramathan Ggoobi.

The Deputy Governor of the BoU, Michael Atingi-Ego, who presided over the ceremony, handed over the licence to Michael Mande, the acting managing director of Top Finance Bank.

The issuance of the Islamic Banking licence follows President Museveni’s signing of the Financial Institutions (Amendment) Act 2023 last month, which paved the way for the introduction of Islamic Banking in Uganda.

"The BoU is 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," Michael Atingi-Ego said.

About Islamic Banking

Islamic banking, Islamic finance, or Sharia-compliant finance is banking or financing activity that complies with Sharia and its practical application through the development of Islamic economics. Some of the modes of Islamic banking and finance include Mudarabah, Wadiah, Musharaka, Murabahah, and Ijara.

Two fundamental principles of Islamic banking are the sharing of profit and loss and the prohibition of the collection and payment of interest by lenders and investors.

Islamic banks make a profit through equity participation, which requires a borrower to give the bank a share of their profits rather than paying interest.

Some conventional banks have windows or sections that provide designated Islamic banking services to their customers.