Government through the Microfinance Support Centre (MSC) has started issuing out Islamic microfinance loans that will help low income earners access finances at a no interest.
MSC officials while addressing journalists in a workshop said they had over Shs 35billion from the Islamic development bank which they intend to give out to SACCOs and other groups all over the country.
John Peter Mujuni, pharm the Executive Director MSC said the money will be given out to all Ugandans; Muslims and non-Muslims but under certain conditions that have to be followed.
“The biggest problem that continues to constrain productivity and household income in Uganda has been inadequate access to development capital due to high interest rates, viagra dosage ” said Mujuni.
“Complicated eligibility procedures and concentration in urban areas by most conventional banks leaves out majority of Ugandans who live in rural areas and are small entrepreneurs. Islamic microfinance will solve the above problem,” he added.
“However the Money will be given under the guidelines of the Islamic sharia law meaning that the money given cannot be used in ventures that differ from the Islamic beliefs. For example businesses dealing in pigs, alcohol, prostitution and gambling will not benefit from the fund.”
Racheal Kobugabe, a business consultant at MSC said they have already trained over 123 staff members and over 80 client institutions all over Uganda that will help in implementing the Islamic microfinance loans.
“We have already given out over Shs3.3billion to 24 member projects in Western parts of Uganda in the districts of Kanungu and Kisoro. The first disbursement was in March 2017,” she said.
However, she noted that in addition to following the shariah laws, the projects that needed funding under the Islamic banking will have to be registered, have clear ownership and governance structures, and should have been in existence for 2 years.
Businesses that are uncertain and based on market speculation will not be funded.
Islamic banking is already being practiced in different African countries like S. Africa, Rwanda, Kenya, Tanzania and Sudan.
In Uganda, the kind of banking is still new and MSC is the first institution to practice it.
This kind of banking is based on the principle of loss and profit sharing and emphasizes the principle of no interest.
Under the Islamic banking, there are differences like the Musharaka (equity financing or joint venture partnership between the entrepreneur and the financial institution, Marabaha (cost plus financing or asset financing ), Madaraba (profit sharing ) Salam (forward sale) Muqawala and Istisna.
However, the institution noted that they were already facing challenges of noncompliance with the shariah law but had an institution in place to make sure that the money loaned out is used in the projects that comply with the rules set by the Islamic development bank.