Islamic banking the way to go, says Microfinance Support Centre

Rachael Kobugabe, the business development service officer at the Microfinance Support Centre (MSC) has said that they have embarked on a training for the business community on the principals of Islamic

microfinancing.

After the amendment of the financial institution act, the MSC started the implementation of Islamic micro financing.

But this according to players has not yielded results since most Ugandans lack knowledge on how it operates and how they can access finances under this arrangement.

But with the high interest rates charged by most commercial banks, Kobugabe said Islamic banking is bound to liberate businesses.

"Islamic microfinancing has a very good model of financing that came to help people who are using the conventional financing. High interest’s rates had pushed many business people to the wall and Islamic financing has come to liberate them," Kobugabe said.

Unlike the conventional financing that facilities all kinds of businesses, Islamic banking doesn’t finance businesses that contradict sharia laws.

"Businesses like piggery, betting and bars can’t be financed by Islamic financing since it operates under the sharia laws” Kobugabe said.

Most banks fear financing the agricultural sector due to the associated risks, yet under Islamic banking the borrower shares the loss and profits with the bank.

"When you talk about Islamic micro financing you are talking about partnership. We finance already exiting business that only need a push and we are focusing more on agriculture. Here we share both the profits and the losses depending on the circumstances," she said.