Kampala. Government must ensure that it puts in place policies and regulations to support Islamic Banking, according to a finance and banking lecturer at Islamic University in Uganda.
Speaking in an interview at the weekend, Mr Sulaiman Lujja, the head of Islamic banking and finance at IUIU, said there should be caution given that new initiatives come with challenges and risks.
Operations of Islamic Banking, he said, cannot succeed without stringent regulations, urging government and banks to establish advisory boards to offer oversight.
“Each bank that will offer the service must have an in-house advisory board,” he said.
Mr Peter Kyambadde, the KPMG senior manager for tax and corporate services, recently told Daily Monitor that Islamic Banking will stabilise the industry’s unpredictable charges on loans and other facilities.
“If there is one thing that Islamic Banking will bring … is certainty in the market. You will not be surprised along the way with extra charges beside the ones you agreed upon when entering the contract. This is good for the industry and the economy,” he said. This means, he added, that customers will be able to acquire goods bought and sold to the consumers instead of being charged interest throughout the repayment period.
“The profit that the bank will earn will be predictable even though it is spread over longer repayment period,” he said.
A number of banks such as Centenary, Tropical and Exim, among others have already shown interest in the concept of Islamic Banking that allows the financial institution and the custom to share proceeds of the loan facility.
Charging of interest in Islamic Banking is forbidden and profits or losses are always shared.