Kampala — FOLLOWING the recent global financial crisis, questions are being raised about the safety of people's money in banks and it may be time to think about an alternative banking system.
And Islamic or Sharia banking could be that system. It is an ancient system that was rejuvenated in the 1970s in the Arab world guided by the principles of banking contained in the Qur'an.
Already, Bank of Uganda is studying the guiding principles and is yet to license any bank to offer Sharia banking services according to the Central Bank's spokesman Juma Walusimbi. However, there are banks ready to indulge their clients in Sharia banking.
In his opening speech during the Organisation of Islamic Conference (OIC) in June in Kampala, Ahmed Darwish AlMarar said: "We are ready to support Uganda. Such a great country with all of its wealth of natural resources is not to be missed."
He was talking about the National Islamic Bank of Uganda, the first in East Africa. The bank is expected to offer local access, local currency lending, packing of local markets using sharia principles.
AlMarar said Uganda has an overcrowded market with more than 15 commercial banks, but with limited competition because there are only about two million accounts for a population of 30 million, low loan penetration and about 100 Automatic Teller machines.
Tropical Africa Bank plans to start Sharia banking in two years, according to the executive director Prince Kassim Nakibinge.
"The major principal is that people should not be charged interest," says Dr. Jamil Serwanga a specialist in Islamic economics.
However, every banking system has some costs; no car can run on an empty tank. According to Dr. Serwanga, in Islamic banking there are two types of depositors.
First are those who deposit their money to the bank for safe custody and will withdraw it at any time without notice and those who withdraw their funds from the bank.