Bank of Uganda (BoU) has expressed disappointment that no financial institution has applied formally for a license to offer Islamic Banking services in Uganda.
Dr. Louis Kasekende, the Deputy Governor, BoU said the Financial Institutions (Islamic Banking) Regulations, 2018 are now in place.
“These regulations permit the BOU to issue a license for operating Islamic Banking Business in Uganda, either as a fully-fledged Islamic Financial Institution or to open an Islamic banking window alongside the conventional banking business,” he said
Kasekende made the remarks during Eid-El-Fitri Celebrations for the Bank of Uganda Muslim Community held at BoU Gardens on June 22, 2018.
He however revealed that no bank has applied yet to offer Islamic banking services in Uganda.
“The rather not so good news is that BOU is yet to receive any formal application for a license to open up an Islamic banking business, although there have been expressions of interest by various local and international entities,” he said, adding: “Let me use this opportunity to highlight a few key principles of these regulations so that you can ably enlighten all those interested in taking advantage of this opportunity.”
First, the capital requirements for Islamic Financial Institutions are the same as those of the conventional Financial Institutions, he said.
Second, the conduct of Islamic banking business as provided for in the Financial Institutions (Amendment) Act, 2016 shall also be subject to all other existing Financial Institutions’ regulations and prudential requirements, he added.
Third, he said, the Board of Directors of each licensed financial institution are required to set up a Shariáh Advisory Board, comprising at least three members to be vetted by BOU, and their cardinal role is to ensure compliance with Shariáh rules.
“Finally, we are aware, rather informally, of concerns expressed by some stakeholders regarding elements of the prudential guidelines, such as the relationship between a licensed Islamic financial institution and the Central Bank as a lender of last resort. I wish to encourage stakeholders to reach out to us with any of these reservations so that we can discuss and ensure that the regulatory regime permits both the growth of the Islamic financing window in Uganda and the continued stability of the financial sector as a whole,” he said.
Ali Kivejinja, the second Deputy Prime Minister and Minister for East African Affairs was the Chief Guest at the event.