The Central Bank of Uganda has granted its first Islamic banking license to Salaam Bank Ltd., a subsidiary of Djibouti-based Salaam African Bank.
This significant step comes after Uganda passed legislation in June to accommodate Shariah-compliant finance activities.
#NEW: 𝗣𝗥𝗘𝗦𝗦 𝗥𝗘𝗟𝗘𝗔𝗦𝗘
Bank of Uganda issues first Islamic Banking Licence to Salaam Bank Limited.
— Bank of Uganda (@BOU_Official) September 8, 2023
Islamic finance, which prohibits the charging of interest, could potentially unlock substantial growth in East Africa’s third-largest economy.
It is expected to attract customers who have previously avoided traditional lenders due to religious reasons.
Globally, Shariah-compliant assets are among the fastest-growing financial instruments, with forecasts predicting a rise to $3 trillion worldwide in the next decade, up from about $2.1 trillion at the end of 2016.
“We believe that Islamic banking has the potential to make a significant contribution to the development of Uganda’s financial sector,” stated Michael Atingi-Ego, the Central Bank’s Deputy Governor.
Salaam African Bank made its entry into the Ugandan market in 2022 through the acquisition of Top Finance Bank Ltd., as part of a broader strategy to expand in East Africa.