OPINION

By Patricia Amito Lutwama

On behalf of the Uganda Bankers’ Association (UBA), we congratulate Salaam Bank Ltd on receiving the first Islamic banking license in Uganda. In addition, we salute them for completing the transition from Top Finance Bank.

Islamic banking follows the principals of Sharia law where banks do not charge interest on loans but instead risk and profit share on endeavors, promote stability in investments through avoidance of gambling, serve clients regardless of religion, ethnicity, gender, or any other distinction and accelerate economic development by supporting sectors that promote entrepreneurship, innovation as well as new and emerging businesses.

Islamic banking will not only be a catalyst for the efforts by the banking industry to drive financial inclusion but will also serve as a lightning rod, attracting investment, and unlocking funds from the Islamic world, funds we sorely need in this economy.

At UBA, we believe that the introduction of Islamic banking will transform the industry with new product innovations and offering that will be complementary to the services already available on the market. This will ultimately contribute to widening the reach of financial services to the previously underserved or unserved population categories.

The banking sector plays an intermediary role in terms of mobilization of deposits which are then available for on lending to promote investment for both public and private sector. By depositing your money in the formal financial sector, you at the bare minimum, ensure the safety of your money, but that money can then be on lent to producers to keep the economy growing. This financial intermediation, which is the bank’s role in any economy is critical to the economic growth and development of Uganda.

Islamic banking and more specifically Salaam Bank is a welcome additional hand in the quest to mobilise our internal resources for development. Salaam Bank will also cater to those who through conviction would rather not deal with other banks. The urgency for development is such that all hands should be on deck and the more the merrier.

In the words of former Chinese leader Deng Xiaoping “Black cat or white cat, if it can catch mice, it’s a good cat.”

These new capacities both financial and operational if harnessed can become a game changer not only for the industry but also for the economy as a whole. This is particularly crucial at this juncture when the Bank of Uganda has raised capital requirements for banks.

So again, we at UBA welcome the introduction of Islamic banking and the Salaam Bank Ltd to the banking industry.

The writer is the Head Communications and Corporate Affairs, UBA