Parliament has amended a section of the Financial Institutions Act, of 2004 to remove a provision for a Shariah Advisory Council as a requirement for establishing Islamic Banking in Uganda.
During plenary on Tuesday, the House passed a series of Bills, Members of Parliament noted that it would be over-legislation to consider the provision and opted for the Bank of Uganda to address the Islamic Banking operational issues.
Kiryowa Kiwanuka, the Attorney General explained to the House that maintaining in the Financial Institutions Act a provision for the Sharia Advisory Council would complicate the Central Bank’s supervisory mandate over a product it has helped to create.
Bugweri County Member of Parliament Abdu Katuntu agreed with the Attorney General, reiterating that the Bank of Uganda just needs to ‘create a Department in charge of Islamic Banking’ which he pointed out could ‘come under Regulations and not substantive law’.
Meanwhile in the Excise Duty Amendment Bill 2023, the MPs passed to change Schedule 2 of the Excise Duty Act and place a 15 percent excise duty on the ledger, ATM, and withdrawal fees, to bring Islamic Banking products under the same tax regime as other banking products.
The MPs also unanimously approved the amendment to the second schedule of the Stamp Duty Act to reflect a 15,000 Shillings charge on Islamic Banking-related agreements which now harmonizes excise duty uniformly on all banking products.
Equally passed was the Value Added Tax – VAT Amendment Bill, which harmonizes the reporting time for conventional banking practices and Islamic Banking, bringing the country closer to the commencement of Islamic Banking financial products by commercial banks.
The Speaker Anita Among who chaired the session described the laws as an ‘Eid-al-Adhuha gift for the Muslim community’ that has been longing for the introduction of Shariah-compliant banking products. She vowed to resist some people she said have been lobbying to have the Islamic Banking idea frustrated.
Notably, prior to the plenary sitting, some lawmakers under the Committee on Finance, Planning, and Economic Development had vehemently rejected the Bank of Uganda’s proposal to remove the Sharia Advisory Council requirement for Islamic Banking in the country.
It followed a proposal presented to the Committee by Dr. Tumubweine Twinemanzi, BoU’s Executive Director for Bank Supervision. He explained that the Financial Institutions Act requires the council members to possess knowledge and experience in Sharia as well as Islamic Banking.
Further, an ideal candidate is required also to have experience in the financial services industry, a good reputation and recognition in Uganda or elsewhere, and previous experience serving on the Shariah Advisory Board of reputable institutions engaged in Islamic financial activities.
According to Dr. Tumubweine, getting a Sharia scholar with all the qualifications as outlined in Regulation 20 of the Financial Institutions (Islamic Banking Regulations 2018) is impossible, arguing that no member of the Muslim community in Uganda meets the criteria.
Regulation 19 of the Financial Institutions (Islamic Banking Regulations 2018), requires the Council to consist of five members. They include the Governor, the executive director in charge of banking supervision, the head of the legal department at the Bank of Uganda, and two appointed Sharia scholars.
According to BoU, neighboring Kenya, Tanzania, and Rwanda which already have Islamic Banking do not have such councils. The MPs were also informed that out of 50 Muslim nations, only 13 have Advisory Councils at their Central Banks.
Parliament will again convene on Thursday for another plenary sitting to consider the remainder of the Bills whose enactment would set Islamic Banking to sail in Uganda.