The Ugandan government has approved regulations regarding the provision of Islamic finance, while the country’s central bank is expected to publish the rules in the coming months to improve financial inclusion.
Once published, the central bank will be looking for application from financial institutions wanting to offer Shari’ah-compliant financial services.
Uganda is the latest among a collection of African countries looking to offer interest-free banking products for their Muslim populations. In December 2017 the central bank became a member of the Islamic Financial Services Board.
The Nigerian central bank set up similar financial instruments to provide liquidity support for banks in the country which don’t rely on interest.
The move is designed to help foster the growth of the country’s nascent Islamic finance industry. Nigeria, which has the largest Muslim population in sub-Saharan Africa, aims to transform itself into a hub for Islamic banking.
To support this, the Nigerian central bank has been working on new regulatory measures for the proliferation of sukuk (Islamic bonds) and takaful (insurance). According to Reuters, it hopes to re-create the success achieved in countries like Malaysia.
Headlines were made in August 2017 when it was discovered that Uganda-based Crane Bank has been found to have spent millions on IT services and software that didn’t exist.
A report from PriceWaterhouse Coopers, commissioned by the Bank of Uganda, has found that the now-defunct bank splashed more than $9 million on systems. Much of that figure is believed to have been siphoned off for money laundering.
As part of that $9 million investment, both Temenos and Misys (now Finastra) provided software to the bank. A third company, Technology Associates, was also included in the deal. The latter was given the lion’s share of the budget and failed to deliver any form of software or product.
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