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KIU Business Desk: Finance Minister Kasaija Orders BoU to Fasttrack Establishment of Islamic banking

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The Minister of Finance Matia Kasaija has ordered the Bank of Uganda (BoU), to fast track the establishment of Islamic banking in Uganda, Daily Monitor reports.

Quoting Kasaija, Daily Monitor reports that the minister said he has had a communication with the central bank about the obstacles to the establishment of Islamic banking.

“I have just finished talking with Bank of Uganda and I am told that we have some technical, legal and personnel problems that are holding us back, but we will solve this,” Kasaija reportedly said.

He also reportedly said that as government, they had done their job to pass the law and it was now the work of the Central Bank to operationalise the Shari’a-based banking system.

According to business website techjaja.com, in the Financial Institutions Act 2004 amendment done in 2016, the establishment of fully-fledged Islamic Financial Institutions in Uganda was allowed and the existing Financial Institutions were given the green light to offer the banking system alongside their conventional banking services.

Islamic banking is a banking system based on the principles of Islamic or Sharia law.

It applies concepts derived from the Quran and the writings of Islamic scholars which revolve around the value of a sound currency and fairness in transactions. This requires that whoever makes a transaction conducts it according to what is permissible and lawful under Sharia law.

It is based on four principles namely; prohibition of payment and receipt of interest, mutuality of risk sharing-profit and loss, prohibition of investment in harmful Businesses and prohibition of uncertainty and speculation

Picture credit: Pakistan and Gulf Economist