President Museveni, has supported the introduction of Islamic banking in Uganda
KAMPALA — President Yoweri Museveni is today (Wednesday, March 27, 2024) set to officially preside over the national launch of Salaam Bank Limited (Uganda).
The national launch is slated today at Kololo Independence Grounds during Duwa Prayers hosted by his office.
Salaam Bank, formerly Top Finance Bank, recently became the first financial institution in Uganda to be granted a license by the Bank of Uganda to offer Islamic banking services. This followed the signing and handover of the operating license by the Deputy Governor, Bank of Uganda Michael Atingi-Ego to Salaam Bank on September 8, 2023.
Islamic banking follows the principles of Sharia law where banks do not charge interest on loans but instead risk and profit share on endeavors, promote stability in investments through avoidance of gambling, serve clients regardless of religion, ethnicity, gender, or any other distinction, and accelerate economic development by supporting sectors that promote entrepreneurship, innovation as well as new and emerging businesses.
Financial experts say Islamic banking will not only be a catalyst for the efforts by the banking industry to drive financial inclusion but will also serve as a lightning rod, attracting investment, and unlocking funds from the Islamic world, funds Uganda sorely needs in the economy.
Mr. Ibrahim M. Abdirahman, Chairman Salaam Bank Limited (Uganda), says the bank is open to serving all faiths but with strict adherence to ethical values that protect humanity.
“The bank does not fund activities that harm humanity and the environment,” said Mr. Abdirahman, adding that the bank will offer the government, a chance to benefit from Sharia-compliant bonds (Sukuk) from which it can raise capital for various infrastructure projects without incurring interest-based debt.
“Sukuk attracts investments from individuals and institutions seeking Sharia-compliant financial instruments from the international market thereby attracting Direct Foreign investment into the country,” he says.
Mr. Ibrahim M. Abdirahman, the Chairman Salaam Bank Limited (Uganda), says the bank serves every but using strict ethical values that protect humanity
Michael Mande, the Managing Director and CEO of Salaam Bank Ltd said ahead of the launch Ugandans should expect to experience a bank that is dedicated to the best business ethics and focused on continuously improving the value and accessibility of its services in an effort to improve the lives of others in their community.
“Our goal is to expand financial inclusion to all Ugandans who could either not afford the rates offered by the conventional banking system or found the system to be against their beliefs since it carries an element of Riba,” said Mande.
He added: “Ugandans should be certain that they will benefit from our Profit and Loss sharing (also called participatory financing) whether as a business enterprise or a person which/who has obtained financing from an Islamic bank/financial institution. As financing is repaid, the bank collects some agreed-upon percentage/ratio of the profits (or deducts if there are losses) along with the principal of the financing. Unlike a conventional bank, there is a fixed amount of profit collected along with the principal of the financing.”
The similarities between conventional and Islamic banks are as follows.
Financial Services: Both conventional and Islamic banks offer a wide range of financial services, including savings and checking accounts, loans, credit cards, and investment products. Customers of both types of banks can access these services based on their financial needs.
Regulation: Both conventional and Islamic banks are regulated by financial authorities in their respective countries. They need to comply with the regulatory standards and guidelines set forth by the government and central banking institutions to ensure the stability and integrity of the financial system.
Profit Motive: Both types of banks aim to generate profits for their shareholders. They engage in various financial activities and investments to earn revenue, which can be used to cover operational costs, provide returns to shareholders, and strengthen their capital base.
Customer Focus: Both conventional and Islamic banks focus on meeting the financial needs of their customers. They offer services such as personal loans, mortgages, business financing, and wealth management solutions to cater to individual and corporate clients.
Risk Management: Both types of banks employ risk management strategies to mitigate financial risks associated with lending, investments, and market fluctuations. Risk assessment, credit analysis, and portfolio diversification are common practices in both conventional and Islamic banking.
Use of Technology: Both conventional and Islamic banks leverage technology to enhance customer experience, improve operational efficiency, and provide online banking services. Mobile banking apps, internet banking platforms, and electronic fund transfers are widely used by customers of both types of banks.
Global Presence: Conventional and Islamic banks can be found in various countries around the world. They operate internationally, serving diverse customer bases and contributing to the global banking industry.
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