Tropical Bank To Pioneer Islamic Banking In Uganda Before End Of Year

Tropical Bank is in final stages of rolling out Islamic Banking products and services in Uganda.

Speaking at the sidelines of Tropical Bank’s annual dinner for corporate customers held at Hotel Africana on Thursday, Dennis M. Kakeeto, the Bank’s Executive Director revealed that they are ready to pioneer Islamic Banking in the country.
“We applied (to the Bank of Uganda) for the license in January this year and we are at the tail end of getting it. We shall have the license before the end of this year,” Kakeeto said.

Islamic Banking (IB) refers to a system of banking or banking activity that is consistent with the principles of the Shari’ah (Islamic rulings), and its practical application through the development of Islamic economics.

The core element of Islamic banking as opposed to the popular conventional banking is that commercial banks offer support to businesses at no interest rates. The basic ultimate goal for the parties in this trade is to equally share profits, losses, risks that accrue from the business.

Investments in arms, narcotics, alcohol and gambling among others are forbidden in Islamic banking.

Globally, Islamic Banking is growing at an average of 20% annually.

BoU recently said three financial institutions have applied for licenses to offer Islamic Banking products and services.

Speaking at the Bank of Uganda Iftar Dinner held at the Bank’s Gardens on May 31, 2019, Dr. Louis Kasekende,   Deputy Governor, BoU said:  “…I am now pleased to inform you all that we have since received one application from one of the existing commercial banks (Tropical Bank) in Uganda that is interested in opening up an Islamic finance window. “

He added: “In addition, two institutions – one institution incorporated in the United Arab Emirates and another institution that is incorporated in South Sudan, have submitted applications for Islamic Banking licenses. Our Supervision directorate is expeditiously processing these applications and I hope the applicants will meet all the requirements so that Islamic banking can finally take off in Uganda.”

He didn’t disclose the two financial institutions.

Over a year ago, the Financial Institutions Act 2004 was amended in 2016, with specific provisions allowing for the establishment of fully fledged Islamic Financial Institutions and for existing Financial Institutions to offer Islamic Banking alongside their conventional banking services.

However, no bank is yet to get a license to offer the above services.

Islamic Banking will be crucial to Tropical bank’s top management in their effort to turn-around the financial institution that hasn’t been performing well in the last few years.

According to Kakeeto, Tropical bank is in the process of procuring state of the art platform for online banking. The “seamless” platform will be operational by the end of March next year.

He added that in an effort to take banking services closer to customers, the bank has also rolled out agency banking.

“We currently have 136 agents across the country but we plant to hit 200 by end of this year,” Kakeeto said.