Parliament has passed a series of Bills to harmonise issues relating to Islamic Banking products, only setting aside the Income Tax Amendment Bill for committee and government concurrence.
In its sitting on Tuesday, June 27, 2023, chaired by Speaker Anita Among, the Bills were passed to clear the way for the long-awaited Islamic banking.
The Financial Institutions Act has been amended in section 115B(2) to remove the provision for a Shariah Advisory Council, which MPs said would be over-legislation, instead opting for Bank of Uganda to institutionally address operational issues relating to Islamic banking.
The Attorney General, Hon. Kiryowa Kiwanuka, said maintaining in the Financial Institutions Act a provision for the committee would complicate the central bank’s supervisory mandate over a product it has helped to create.
“First of all, Bank of Uganda should never determine the business model of any commercial bank, it should sit outside to determine whether the product is safe for the customer; if it sits in the advisory council, who will protect the consumers?” he said.
MP Abdu Katuntu (IND, Bugweri) agreed with the Attorney General.
“You have to leave the Bank of Uganda structures to work; there is only one law which is seeking to prescribe the operational work of Bank of Uganda; what you need to have is a department…they can create some departments in charge of Islamic Banking, and this can come under Regulations and not substantive law,” counselled Katuntu.
He added: “Bank of Uganda cannot create and regulate a product at the same time.”
Then came the Excise Duty Amendment Bill 2023, which MPs passed to change Schedule 2 of the Excise Duty Act and place a 15 per cent excise duty on ledger, ATM, and withdrawal fees, to bring Islamic banking products under the same tax regime as other banking products.
This now harmonises excise duty on all banking products uniformly.
MPs unanimously okayed the amendment to the second schedule of the Stamp Duty Act to reflect an Shs15,000 charge on Islamic banking-related agreements.
The Value Added Tax Amendment Bill, which harmonises the reporting time for conventional banking practices and the Islamic banking was also passed by Members, bringing the country closer to the commencement of Islamic banking financial products by commercial banks.
Speaker Among described the laws as an Eid-al-Adhuha gift for the Muslim community that has been longing for the introduction of Shariah-compliant banking products, vowing to resist people she said have been eager to frustrate the idea.
“I want to put this on record; people have been lobbying not to have this Islamic banking passed; but we must pass it;” she said.
Parliament convenes on Thursday, 29 June 2023 to consider the remainder of the Bills whose enactment would set Islamic banking to sail in Uganda.