Uganda: Parliament approves Bill allowing Islamic finance
The Bill also provides for the establishment of agent banking and bancassurance.The Ugandan Parliament last week adopted the Financial Institutions Bill 2015, which introduces amendments to the Financial Institutions Act that pave the way for the development of Islamic finance, bancassurance and agent banking in the country.
"These amendments are a very welcome development in the banking sector as they enable enhanced latitude for the financial institutions to offer more and better and convenient services to clients thus enhancing financial inclusion," managing director of Centenary Bank Fabian Kasi told the Daily Monitor.
Uganda's eleven commercial banks are now able to provide Islamic banking products. Herman Kasekende, the managing director of Standard Chartered Bank Uganda, said that the bank will be required to set aside a separate pool of funds that can be accessed under the Islamic banking model.
Around four million people in Uganda declare themselves Muslim, out of a total population of 33 million.
Banks will also be able to appoint agents to work on their behalf or to sell insurance. Mr Kasekende believes that the new Bill will "revolutionise banking in Uganda because agency banking allows us to be everywhere (…) It has the potential to extend financial services to the unbanked and marginalised communities."
Only 8.3 per cent of the country's population owns a bank account, according to figures from the Central Bank.
The amendments are also expected to increase insurance penetration, which has one of the lowest penetration rates in the world (0.65 per cent).