President Yoweri Museveni has officially launched the national operations of Salaam Bank in Uganda.
This is as he joined the Muslim fraternity for Duwa Prayers at Kololo Independence Grounds on Wednesday, March 27.
Salaam Bank Uganda, a subsidiary of a Djibouti-based bank, received the licence at the central bank late on September 8, 2023, after the Ugandan Parliament passed legislation to authorise Islamic banking, which President Yoweri Museveni signed into law in August 2034.
The legislation removed the requirement to establish a “central sharia advisory council”, which the Bank of Uganda had opposed.
“I welcome you Salaam Bank to Uganda. This is a big market. The population of Uganda is 48 million now,” Mr. Museveni said during the national launch held at Kololo Independence Grounds, in Kampala.
“In the next 26 years, the population of Uganda will be 106 million, so allow more Islamic banks to come here,” he said commending Salaam Bank for leading the way.
Islamic Banking is a phrase used to refer to the banking services that follow Islamic principles, which bar the charging of interest on a loan (RIBA).
Instead, it provides for the lender to take benefits in the project and at the end of it, share in the incomes or losses of the project.
Apart from the reduced risk of failure to pay back, enterprises get an additional advantage of expert or technical contribution by the lender who ensures the success of the credit.
“Islamic banking has the potential to make a significant contribution to the development of Uganda’s financial sector by bringing more Moslems to the money economy,” Mr. Museveni said.
In Islamic banking, banks and their customers are considered partners who share incomes or losses based on a predetermined and agreed-upon ratio. This practice demands full disclosure or minimal information asymmetry between both parties.
HE Mahamoud Ali Youssouf, the Minister of Foreign Affairs of Djibouti who led the Djouboutian delegation to Uganda underscored, the inspiring ambition of the Salaam group to broaden the scope of its activities all over the continent.
Mr. Ibrahim M. Abdirahman, Chairman Salaam Bank Limited (Uganda), says the bank is open to serve 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.
According to Mr. Abdirahman, Islamic Finance offers among others, Sharia-compliant bonds (Sukuk) from which the Government 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.
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 to improve the lives of others in their community.