Lawmakers have rejected Bank of Uganda’s (BoU) proposal to remove the Shariah Advisory Council requirement for Islamic Banking in Uganda under the Financial Institutions Act.
According to BoU, a Sharia scholar appointed to the central bank's Shariah Advisory Council should possess knowledge and experience in Sharia, Islamic Banking, or related disciplines as specified by the Central Bank.
They should also 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.
Tumubweine Twinemanzi, the Executive Director for Bank Supervision at BoU, presented the proposal to the Committee on Finance, Planning and Economic Development on Tuesday, 27 June 2023.
He explained that the Financial Institutions Act requires the council members to possess all four qualifications outlined in Regulation 20 of the Financial Institutions (Islamic Banking Regulations 2018) but however, no member in Uganda's muslim community meets the criteria.
According to Regulation 19 of the Financial Institutions (Islamic Banking Regulations 2018), the board should consist of five members, including the Governor of the Bank of Uganda, the executive director in charge of banking supervision, the head of the legal department at the Bank of Uganda, and two Sharia scholars appointed to the council.
Twinemanzi acknowledged the presence of individuals with extensive knowledge and experience in Sharia law in Uganda but not in the financial service.
AUDIO: Central Bank's Tumubweine Twinemanzi
"We have very many people with knowledge and experience in Sharia law, including individuals with PhDs in Islamic Financing who have been teaching Islamic finance for close to a decade. However, when it comes to financial services experience in this country, they do not possess the required background," he said.
Twinemanzi informed the committee that out of 50 Muslim nations, only 13 have Advisory Councils at their Central Banks. He highlighted that countries like Kenya, Tanzania, and Rwanda, which already have Islamic banking, do not have such councils.
He requested the committee's approval to pass laws for implementing Islamic Banking in Uganda and suggested that the Central Bank be given more time to study the matter before establishing the Advisory Council.
The committee chairperson, Hon. Amos Kankunda, voiced doubts about relying on the Central Bank to form the council. He raised questions about BoU’s ability to oversee the Shariah Advisory Council, given their previous approval of it.
Hon. Muhammad Muwanga Kivumbi (NUP, Butambala County) demanded evidence of consultations by the Bank of Uganda to identify qualified Muslims.
"Frankly, that is a weak reason. The regulations you refer to are set by you and are not statutory. When we give you an Act to implement, you have a duty to frame regulations that comply with the Act, not to fail it. I do not believe you have thoroughly searched for qualified scholars. Have you advertised and made the requirements known?" he questioned.
