Uganda introduces groundbreaking interest-free Islamic banking

UGANDAN President Yoweri Museveni on Wednesday officially launched national operations of the country’s first interest-free commercial Islamic bank, allowing it to operate following Islamic principles.

Museveni said at the launch ceremony for the Salaam Bank in the capital Kampala that Islamic banking has the potential to significantly contribute to the development of Uganda’s financial sector and attract more Muslims to invest in the country’s economy.

The government does not believe in discrimination and treats all Ugandans equally, regardless of religion or tribe, he said, adding that this attribution has allowed the country to develop socially and economically.

“I encourage you to fight poverty and create wealth,” he remarked.

“Some people were initially opposed to the establishment of Uganda’s Islamic University. I said no, let it operate. It has now produced a large number of graduates in various professions, including non-Muslims.

“When they told me about Islamic banking, I told them I had no problem with it. I said we should let them operate and that is why we have Salaam Bank now,” he explained.

In September last year, the Bank of Uganda granted its first Islamic banking license to Salaam Bank Uganda, a subsidiary of a Djibouti-based bank after parliament passed legislation authorizing Islamic banking, which Museveni signed into law.

Sheikh Erias Kigozi, a Ugandan cleric from the Wakiso district of central Uganda, who spoke on behalf of Muslims at the bank’s launch, thanked the Ugandan for being a good leader who cared about Muslims and made it possible for them to have a banking system based on Islamic principles.

Djibouti’s Foreign Minister Mahmoud Ali Youssouf, for his part, also extended warm greetings to Museveni on behalf of his country’s President Ismail Omar Guelleh.

He underscored the inspiring ambition of the Salaam Group to broaden the scope of its activities all over the continent, including Uganda, which he said has a safe and solid financial institution.

On the occasion, Salaam Bank Chairperson Ibrahim M. Abdirahman said the population, including non-Muslims, has embraced Islamic banking because of its values.

According to S&P Global Ratings, the global Islamic finance industry is expected to grow by around 10% in 2023-2024, despite the economic slowdown, following a similar expansion in 2022.