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KAMPALA - President Yoweri Museveni has symbolically launched the first Islamic Bank in Uganda by cutting the tape before thousands of Muslims applauding him.

The event took place at Kololo Ceremonial Grounds in Kampala on Wednesday, March 27, 2024.

“I welcome- [the] Islamic Bank, which is the first to come to Uganda. This is a big market of 48 million people. Ugandans produce a lot and in the next 26 years, the population of Uganda will be 106 million,” the President, who was wearing a big hat and a white shirt said, to cheers and applause from the excited Muslims who thronged the grounds for the occasion.

“So, thank you very much for coming and you are going to straightaway start giving these people (Muslims) money [loans] based on Shariah principle,” he added.

Salaam Bank Limited, formerly Top Finance Bank Limited, is a commercial bank and the first institution to offer Islamic financing in the country, ushering in what its managers say is a new era of financial possibilities rooted in ethical principles.

The institution received an Islamic commercial banking licence on September 8, 2023, and the licence was personally handed over by acting Bank of Uganda governor Dr Michael Ating-Ego.

It is a Ugandan subsidiary of Salaam African Bank of Djibouti, through Top Finance Bank, which it acquired in August last year and its chief executive officer is Michael Mande.

According to its website, its launch in Uganda followed the expansion in Asia, particularly in Malaysia as well as in Ethiopia and neighbouring Kenya.

The issuance of the license in Uganda followed the signing of the Financial Institutions (Amendment) Act 2023 in January 2024 by President Museveni, which paved the way for the introduction of Islamic Banking in the country.

No charging interests

Its managers say 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. Instead, it provides for the lender to take interest in the beneficiary project and at the end of it, share in the profits 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,” the bank said in a statement last month.

While handing over the license, Atingi-Ego said that the Central Bank was committed to providing oversight and support to Salaam Bank as it embarks on this new journey.

“Islamic banking has the potential to make a significant contribution to the development of Uganda’s financial sector,” he noted.

Salaam said the licenses in Uganda will now allow Ugandan nationals to enjoy 100% Islamic financial products, allowing the introduction of quality products and services to Ugandan banking.

Parliament’s enactment of the Income Tax Amendment Bill No.2 of 2023 last year cleared all legal roadblocks to the commencement of Islamic banking products in Uganda.