Islamic Banking Kicks Off In Uganda As BoU Issues 1st License To Salaam Bank Ltd

By Frank Kamuntu

Uganda’s central bank has issued its first Islamic banking license since the country passed legislation to accommodate Shariah-compliant finance activities in June.

The license went to Salaam Bank Ltd., a unit of Djibouti-based Salaam African Bank, the Bank of Uganda said in a statement Friday.

The adoption of Islamic finance, which doesn’t allow the charging of interest, could unlock significant growth in East Africa’s third-biggest economy by attracting customers who have avoided traditional lenders on religious grounds.

Shariah-compliant assets are among the world’s fastest-growing financial instruments and are forecast to reach $3 trillion worldwide in the next decade, from about $2.1 trillion at the end of 2016.

“We believe that Islamic banking has the potential to make a significant contribution to the development of Uganda’s financial sector,” the central bank’s Deputy Governor Michael Atingi-Ego said in the statement.

Salaam African Bank entered the Ugandan market last year through the acquisition of Top Finance Bank Ltd. — part of a broader strategy to expand in East Africa.

The Ugandan parliament authorized Islamic banking in the country in June.