Uganda’s central bank has issued its first Islamic banking license since the country passed legislation to accommodate Shariah-compliant finance activities in June.
The license went to Salaam Bank Ltd., a unit of Djibouti-based Salaam African Bank, the Bank of Uganda said in a statement Friday.
The adoption of Islamic finance, which doesn’t allow the charging of interest, could unlock significant growth in East Africa’s third-biggest economy by attracting customers who have avoided traditional lenders on religious grounds. Shariah-compliant assets are among the world’s fastest-growing financial instruments and are forecast to reach $3 trillion worldwide in the next decade, 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,” the central bank’s Deputy Governor Michael Atingi-Ego said in the statement.
Salaam African Bank entered the Ugandan market last year through the acquisition of Top Finance Bank Ltd. — part of a broader strategy to expand in East Africa. The Ugandan parliament authorized Islamic banking in the country in June.
