President Yoweri Museveni has assented to the amended Financial Institutions Bill 2015, part of which allows introduction of the Islamic banking system.
The President’s media assistant Mrs Linda Nabusayi confirmed the development while speaking to us on phone.
The Bill has been challenged by a section of Christian Religious leaders who are opposed to its introduction of the Islamic banking element that they believe will be hard to regulate.
The Financial Institutions Bill was passed by Parliament on January 6, 2016, paving way for inclusion of Islamic banking, agency banking, and bancassurance in Uganda’s financial sector.
The Church leaders are opposed to the law and fear that it poses a threat to Uganda’s security and stability.
These reportedly tendered a petition to the President shortly after the bill was passed, asking him to reconsider signing it.
Therein, they raised a number of concerns, among them that the law might open gates for Sharia law — on which Islamic banking itself is premised — to take root in the country.
“We regret to note that the introduction of Sharia law in the country opens doors to the ultimate operationalization of fully-fledged Sharia not only in the finance sector as contained in the bill, but in all aspects of our national life,” argued the church leaders.
One of the principles of Islamic Banking also known as “Sharia compliant finance” is that it prohibits acceptance of interest or fees for loans of money (known as Riba), whether the payment is fixed or floating.
The system gained prominence in Uganda during the time of former Finance Minister Maria Kiwanuka, with hope that it would encourage business expansion and start-ups since most of this has been hampered by high interest rates offered by local financial institutions.
The Islamic Banking system however, prohibits investment in some businesses that provide goods or services considered contrary to Islamic principles such as pork or alcohol.
According to the church leaders’ petition to the president, signed by the Arch bishop of Church of Uganda Stanley Ntagali as chair of the Uganda Joint Christian Council; the country by allowing Sharia principles opens itself to a number of other security concerns that extend way beyond finance.
They argued that that the new law might create a “legal stalemate with the Constitution of Uganda” and that all under this arrangement, all Muslims might be compelled to use only Islamic banking which may deny them the right to freedom of choice.”
“Since in this bill the central Bank seeks to establish a separate regulatory body to oversee Islamic banking, there will be a serious challenge to harmonize this kind of banking with the traditional banking system. This is because Islamic banking will be run on Sharia law which is hinged on unique legal principles which are in many ways contrary to Uganda’s constitution,” they added.