With a Central Sharia Advisory Board up and running at its Central Bank, Uganda's regulator has announced that it is ready to grant the first licences for Islamic banks, including private banks. The process of changing the regulatory regime for this began in 2008.

As Islamic Sharia law (or 'Halal law') prohibits the payment or receipt of interest, Islamic banking depends heavily on depositors and their banks sharing the profits, if any, from the things they invest in jointly. In other words, in some Islamic banking contracts, the bank ought to acquire ownership of assets before selling them on and making profits out of them. The religious reasoning behind this seems to be that Muslims should not make money solely from the manipulation of existing money but should earn it from the provision of goods and services. Honest toil should lead to the earning of money rather than the mere lending of it to someone else; direct investment in honest toil (and this includes insurance business) is counted as toil itself.

Up until this year, s37 Financial Institutions Act 2004 stopped all financial institutions from directly or indirectly engaging in trade, commerce and industry - a policy that had its roots in Roosevelt's 'New Deal' as a way of keeping ordinary banking business away from reckless speculators - while s38 forbade them to acquire immovable property that was not intended for use in conducting banking business. The impetus to change this came in 2008 with the first application from a bank to be allowed to do Islamic business. Demand has been growing steadily since. is restriction inevitably delayed the smooth operation of Islamic Banking given that it is anchored on financial institutions’ participation in these very sectors.

The answer to this conundrum was the Financial Institutions (Amendment) Act 2016, passed in January but without any decision on the make-up of the sharia advisory board which, by some accounts, is the body that will regulated Islamic banks. The private sector has been lobbying for the 'fast tracking' of appointments to this board ever since. The Act provides for a deposit protection fund and access to credit reference bureaux and deals with the Islamic side of agency banking, bancassurance, mobile banking and money transfers.

President Museveni is a great champion of Ugandan Islamic banking, no doubt spurred on by the fact that Kenya, Rwanda and Tanzania have already entered the race for this growing portion of private banking business. Last week Ms Justine Bagyenda, the supervisory director at the central bank, announced to reporters that applications for business could now come in, a sure sign that the advisory board has begun operations. Existing banks that want to set up Islamic departments are welcome to apply and, by all accounts, most of the large banks in the country aim to do so.