The Observer – Any attempt of modesty was thrown out of the window the minute some religious leaders learnt that government had pushed through the amendments to the Financial Institutions Bill 2015, part of which paved the way for Islamic banking, saying the country was bound to face its most serious security threat if the Muslims had their way, writes ALON MWESIGWA.
A group of religious leaders has petitioned President Museveni, protesting the incorporation of Islamic banking into Uganda’s financial system.
In letter dated January 14, 2016, the authors, who describe themselves as “church leaders in Uganda” urge the president not to sign the amendments, arguing that Sharia law, the base on which Islamic banking operates, “will have far-reaching implications beyond the suggested purpose of finance.”
The statement, which The Observer has obtained, is signed by arch bishop of Church of Uganda Stanley Ntagali as chair of the Uganda Joint Christian Council.
Other signatories are Bishop Simon Peter Emau, the chairman of the Evangelical Churches of Uganda, Pastor Daniel Matte, the president of the Seventh Day Adventist church.
The Financial Institutions (Amendment) Bill 2015 was passed on January 6, 2016, paving way for inclusion of Islamic banking, agency banking, and bancassurance in Uganda’s financial sector.
The bill now awaits the president’s assent but the protest of some sections of the church leaders could prove a setback and an indication that not enough sensitization was done before the passing of the law.
The church leaders noted that “we view the passing of this bill as one of the most serious threats to national security and stability with potential threats to future generations as well.”
One key feature in Islamic banking is that it enables a financial institution to lend without charging interest. According to the International Monetary Fund (IMF), it is a form of financial intermediation based on profit and loss sharing (PLS) and the avoidance of interest rate-based commitments and contracts that entail excessive risks and finance activities prohibited under Islamic principles such as alcohol.
“We regret to note that the introduction of Sharia law in the country opens door to the ultimate operationalisation of fully-fledged Sharia not only in the finance sector as contained in the bill but in all aspects of our national life,” reads the church leaders’ letter.
“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.
Officials at the Bank of Uganda said they hadn’t seen the petition. Last month, the central bank informed journalists that they were working on regulations that would operationalise the new amendments.
Meanwhile, some commercial banks had expressed their gratitude to the introduction of agency and Islamic banking.
In a statement in January, Standard Chartered bank said: “That’s great news, not just for Uganda’s Muslim population, but anyone keen to see a thriving Ugandan banking market based on choice for consumers.”
Uganda joins countries such as Kenya and Nigeria in accommodating Islamic banking.
“With the first licenses granted in Kenya just six or seven years ago, that would make Uganda’s leap into Islamic banking a competitive advantage,” Stanchart says. It is also present in Tanzania.
The market for Islamic financial assets has grown at an annual average rate of about 16 per cent since 2006, according to the IMF.
Starting with a handful of institutions and negligible amounts in the late 1970s, Islamic finance grew to about 350 institutions and global total assets of about $1.7 trillion in 2013, according to a 2014 IMF working paper.
Islamic finance has expanded throughout the Middle East, Indonesia, the United Kingdom, North Africa, and, more recently, in some sub-Saharan African countries, said the IMF, adding that this is despite the fact that Islamic financial assets make up less than one per cent of the world’s financial assets.
