ISLAMIC BANKING ,THE LONG WALK TO FREEDOM

“There’s no interest or income tax under Islamic Banking Financing. The farmers of this Bill simply didn’t interrogate.”

Islamic banking is a banking system that us based on the spirit and value system of Islam and governed by the principles of the Islamic Shariah of being interest free(Riba). It has six major types that include;

Murabaha,Ijarah,Istisnaa,Mudarabah, Musharaka, and Tawarruq. In the Islamic banking system the bank obtains money through sharing of profits unlike in conventional banking where there’s collection if interest on borrowed money.
Islamic banking has grown over time and it has penetrated from the Middle East, Asia, and Africa and it has grown from 210 billion USD in 2003 to USS 1.8 trillion in 2013 according to statistics from International Monetary Fund (IMF).


In Uganda, Islamic banking has been seeking its penetration to the conventional banking dominated pearl of Africa. In January 2016, the Financial Institutions Act 2004 (FIA) was amended to cater for Islamic Finance and banking. The amendment turned effective on February 4, 2016 . The finance regulator for Uganda, Bank Of Uganda(BOU) was tasked with promotion and ensuring stability with in the Islamic Financing Sector. Since then for technical and some malicious reasons, Islamic banking had failed to find her head in the waves of Uganda’s banking.

On 28 April 2023 , office of the clerk of parliament received a bills supplement Memorandum aiming to amend the Income Tax Act to be able to harness Islamic banking, it was from the minister of Finance Planning and Economic Development Hon.Matia Kasaijja. The bill was moved by. Hon. Henry Ariganyira Musasizi the state minister for Finance Planning and Economic Development and assigned to committee on Finance, planning and Economic Development.

The bill went through a first and second reading and passed by parliament. On Tuesday it was passed by parliament and now the Bill is on the committee stage. Honorable like Abdul Katuntu , Assuman Basalirwa and Shadow minister for Finance muwanga kivumbi, this afternoon in parliament were key note speakers ensuring swift debate to the law beings muslims, and learned friends to the attorney General Kiwanku Kiroywa, the house was put to edge by the legal friends on how the country should vividly view Islamic banking.

Economic expert cautions parliament on the bill

The parliament has shown high interest in the process from the comments the helm of the house made “people have been lobbed not to allow this Islamic banking go through including me ,but we must pass it.” Among commented
Hon.Muwanga Kivumbi (Mp.Butambala), “There’s no interest or income tax under Islamic Banking Financing. The farmers of this Bill simply didn’t interrogate.” He added to the loop holes in the bill . Many Ugandans are looking forward to the implementation and benefitting from Islamic banking. With the current status quo of convention banks imposing a lot of interests from loans and borrowers end up not benefitting from the loans they borrow.
With Islamic banking and the Income Tax Amendment Bill 2023. Ugandans have beacon of hope to recover from the tough economic times the country is going through. This was emphasized by Hon.Basalirwa saying “It’s important to be comforted, as other countries are threatening to cut aid with this kind of system, we are able to accommodate the shocks that might be caused by aid cuts and therefore we should be careful not to use clawback clauses in this piece of legislation where you giving with one hand and taking with the other.”

Parliament now on committee stage of the bill, all Ugandans look forward to the implementation of this long awaited economic Saint.

Article by,
KATONGOLE ARNOLD

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