Uganda taps into Islamic banking market with entry of Salaam Bank

Tuesday April 09 2024
bank of Uganda

Bank of Uganda Headquarters in Kampala, Uganda. PHOTO | MORGAN MBABAZI | NMG


Uganda government’s move to pass legislation allowing Islamic banking, and the subsequent licensing of Salaam Bank, show a growing demand for Sharia-compliant financial services.

Salaam, a subsidiary of a Djibouti-based lender by the same name, opened doors formally in Kampala last month, underscoring what officials said was to serve a growing niche of clients.

Uganda now joins other regional peers such as Kenya and Tanzania, which have opened a window for the issuance of financial services and investment products based on Sharia principles.

The two countries are among a growing list of Sub-Saharan African states placing greater emphasis on Sharia-compliant financial products as alternative financing, according to a report by the Singaporean Nanyang Technical University dated March 2022.

Read: Uganda’s small banks struggle to raise capital

Others include Nigeria, Egypt, Gambia, Senegal, Ethiopia and South Africa.


Uganda President Yoweri Museveni last month officially launched the operations of Salaam Bank, the first Islamic lender in the country, after more than 20 years of waiting giving Ugandans a chance to access both Islamic and conventional banking products.

Salaam, which has operations in Kenya, Somalia and Djibouti, received an operating licence from the Bank of Uganda (BoU) late last year after the Ugandan Parliament passed a Bill allowing Islamic banking in the country.

President Museveni assented to the Bill in August, removing the requirement to establish a central Sharia advisory council, which the Bank of Uganda had opposed.

Islamic banking demand

Estimates by Nanyang Technical University puts the African Islamic Finance market at $375 billion, with Kenya and Tanzania actively courting Islamic finance and investments.

With a Muslim population of over 250 million, coupled with a growing need to fund a multitude of infrastructure development projects, the Islamic finance industry is ready for the pick across Sub-Saharan Africa.

Sharia-compliant financial institutions operate businesses in 72 countries around the world and Islamic banking remains the largest Islamic finance segment with a 70 percent share of the Islamic finance market.

It is followed by Sukuk (Islamic bonds) with 18 percent, Islamic funds (four percent), and Takaful (two percent).

Read: KCB floats first Islamic bond in Tanzania

Islamic finance extends beyond banking to cover various sectors such as insurance (Takaful), capital markets, investment funds and other financial products and services.

Islamic Shariah principles restricts the payment or acceptance of interest charges or ‘riba’ for the lending and acceptance of money.

East Africa

Tanzania launched its Islamic banking in 2008 and since then this kind of banking has grown in popularity in the country owing to the fact that almost half of the population is Muslim.

In 2021, Imaan Finance issued the first Sukuk bond in Tanzania, which was approved by the Tanzanian Capital Markets and Securities Authority (CMSA). The bond was oversubscribed by 36 percent.

Kenya offers various Shariah-based banking, capital markets, investment and insurance products.

Kenya’s Capital Markets Authority (CMA) also approved the country’s first-ever Sukuk bond in 2023 seeking to raise Ksh3 billion ($22.9 million) towards the development of housing projects.

Read: Kenya issues first Islamic bond

Rwanda, however, does not have Islamic finance and banking activities despite its Muslim community making up 12 percent to 15 percent of the population.

Rwanda has been exploring opportunities in Islamic banking as far as back in 2016 when a Malaysian delegation visited Kigali to look into the possibility of introducing Shariah compliance financing.