Scaling Islamic Finance in Uganda: Driving Financial Inclusion and Sustainable Development

Islamic finance is among the fastest-growing segments of the global financial system, reaching USD 3.88 trillion in assets by 2024 (IFSB, 2024) driven by ethical investment, risk-sharing, and asset-backed financing. With projections of USD 7.5 trillion by 2028 (Standard Chartered Bank 2025). Islamic finance is increasingly supporting inclusion, digital innovation, and the halal value chain. The Islamic finance ecosystem comprises of Islamic Banking, Sukuk (Islamic bonds), Takaful (Islamic insurance) and Islamic funds or instruments which support diversfication and investment solutions. Its mechanisms of financing has encouraged both majority Muslims and non minority Muslim countries including those found in Europe mainly United Kingdom.

In Uganda, Islamic finance formally emerged following amendments to the Financial Institutions Act in 2016, later refined in 2023. Even earlier, Islamic microfinance models had been implemented through government initiatives (Microfinance Suppprt Centre) from support from IsDB, financing agriculture, SMEs, cooperatives, and rural livelihoods. Forinstance the Government of Uganda secured a loan of USD 10 million in 2009 to fund several rural projects: agriculture and commercial projects institutions. One of them was Kigarama farmers SACCO in the Sheema district which received USD 140,000 (IsDB, 2020). In 2025, the president of Uganda has gradually showed commitment to support Muslim led SACCOs such as Uganda Muslim Women SACCOs which were given 2.5 billion shillings through office of National chairperson Uganda Muslim Women Council. From 2010, Islamic social finance has also expanded through House of Zakat and Waqf Uganda (HOZWU) strengthening poverty alleviation, education and community development across Uganda.

A major milestone was achieved with the licensing of Salam Bank Uganda’s first fully fledged Islamic bank in 2024 and Tamini General insurance the first Takaful (Islamic insurance) operator in 2025. These developments signal a structural shift in Uganda’s financial landscape.

Islamic finance in Uganda is no longer just a religious alternative, it is a social, ethical, and sustainable engine for inclusive economic growth, investment attraction, and entrepreneurship. With the right regulatory frameworks, growing Muslim population (12-15%) of Ugandan 45 million population, skilled human resource, domino effect from halal value chain and digital applications, Uganda can unlock the impact of financial inclusion. Finally, Uganda's strategic position with IsDB regional activity make Uganda a possible East African Islamic finance hub.

Author: Ssonko Muhammedi, PhD Scholar (Islamic Banking and Finance)UniSHAMS University- Malaysia| Research & Training assistant at HOZWU| Lecturer- Islamic Call University College, Kampala

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