Parliament on 7th January 2016, passed the Financial Institutions amendment Bill. The law will among others things introduce Islamic banking that is consistent with Islamic Shari’ah (law). The parliamentary clearance is, however, subject to the establishment of a Central Shari’ah Advisory Board in the Central Bank to regulate banks providing Islamic banking products.
This was a major worry for some Members of Parliament who demanded that Parliament first of all introduces another Act on the Shari’ah Law before the bill could be passed. The objective of the Bill is to amend the Financial Institutions Act, 2004. The law will provide for Islamic Banking, provide for bancassurance (insurance provided by banks), Agent Banking, special access to the credit reference bureau by other accredited credit providers and service providers.
The Financial institutions Act were enacted to address the crisis in banking sector of the late 1990s that resulted into the closure of several commercial banks.
The committee report highlights that the provision of Islamic banking and Financial products by banks is growing rapidly in Many countries, the committee further notes that currently, 11 out of 22 licensed conventional and Commercial banks in Uganda have expressed interest in Providing Islamic banking products to their customers.
In a recommendation to the Parliament, the committee on Finance proposed that the proposal to introduce Islamic banking and its products be adopted subject to the establishment of a Central Shariah Advisory Board in the Central Bank providing .
Never the less, many stakeholders are excited about the possibility of Islamic banking and its implications.