Banks have petitioned the central bank to review key regulations in Islamic banking to make it less costly for the banks.
Patrick Mweheire, the chairman of Uganda Bankers’ Association (UBA) and chief executive for Stanbic bank said the current regulation requires that a commercial bank that applies to offer Islamic banking must have its own sharia panel comprising a nine muftis.
Mweheire, who was speaking at UBA’s offices in Muyenga on Wednesday, said this is costly for the banks. Mweheire suggested that UBA should instead have one panel which can be used by all its members when advancing Islamic banking products to the public.
Recently, Bank of Uganda deputy governor Dr Louis Kasekende said while the regulations for Islamic banking had been completed, the central bank had not been able to receive even a single application from commercial banks.
“Can we talk about making some of these things less costly,” said Mweheire said as he announced the 2nd UBA annual conference to take place on July 17, 2018.
“If you compare our banking sector to the region or world over, we are very inefficient. We’ll discuss how to bring these costs down,” Mweheire said. “It is a platform to discuss how we move the sector forward. We have 6-7 loss-making banks in the sector.”
The sector is struggling a bit and it comes down to cost issue, he said adding that regulation must catch up with where the sector is moving.
“The regulator must move quicker because things are moving quicker.”
UBA CEO Wilbrod Owor said this year’s conference was building on the series that were started last year. He said there were a lot of issues in the sector and around the world that affect them and need their attention: money laundering, terrorism finance, and digital technologies etc.
He dismissed suggestions that one per cent government tax on mobile money was sponsored by bankers meant to make users turn to the banking sector by making transfer of money via cell phones more expensive.
He said the telecom companies had provided banks with the infrastructure on which they also tapped a couple of customers and improved their services.
“It is in our own interest that mobile money works,” said Owor. “Taxes will constrain financial inclusion. The country risks losing the gains we have made in financial inclusion. We should discuss with government the alternative sources of income.”
For Mweheire, Ugandans needed to sympathize with government as it desperately looks for ways to increase its tax-to-GDP ratio.
“Almost 50 per cent of Ugandan economy is informal and government is trying to figure out how to get these people pay taxes. Mobile money is a nice place to sort of go to because it has the largest usage in the informal sector.”