"The difference between Islamic banking and the one more conventional banking we are used to, is that no interest is charged on loans and probably more importantly the banks are partners in any loan transaction. This has far reaching consequences for our businessmen and economy," she said.
With help from both the
Kigongo said in a statement, "One of the weaknesses of our financial system is its lack of depth."
"They are therefore relatively small amounts doled out and for short periods of time, which do not allow businesses the wiggle room to work. That is before we talk about high interest rates. The bank's argue that their running costs are too high and the difficulty in mitigating against risk justify these high lending rates, the highest in our region," she said.
Kigongo said, "We at the UNCCI are tempted to believe there is not enough competition in the sector and therefore unlikely that banks will lower lending rates or invest more in beefing up their risk assessment capabilities,.
She said banks make money through lending so how would an Islamic Banking institution make money if it did not charge interest?
Charging interest is taboo under Sharia law.
She also said whereas Islamic banking has gained popularity in recent years, following the global financial banking crisis of six years, the practice has been around since the eight century and was employed to finance trade between
"Through a combination of hire purchase, equity participation, deferred payment, profit sharing among others Islamic banking allows for doing business without charging interest on a surplus that is more charitable to businessmen's pockets," Kigongo said.
Kigongo said with a stroke of a pen several new products will come to market.
Beyond just commercial loans, there will be greater scope for leasing, hire-purchasing, venture capital and private equity than before and at more manageable terms than we are currently being exposed to.
She said, "All will be revealed in the upcoming seminar and it would be in all our interests to appraise ourselves of this alternative form of finance.
"We at the UNCCI are proud to be associated with this initiative to bring Islamic banking here and after much study have determined that it has role to play in our country's development."
Kigongo said although an innovation of the Islamic world its services are open to all clients.
"In fact its influence has been growing by leaps and bounds in recent years, in fact it is the fastest growing segment of the financial industry globally with more than a trillion dollars in assets under management globally," she said.
"Banks must make money, just like any other business, but profits should be made within reason without gorging clients and impoverishing everyone except the bankers. We appreciate the services the banks are offering us currently but Islamic banking will not only provide a useful alternative, but also make the conventional bankers rethink their models, which will benefit everyone in the long run," she said. UNCCI has 10 regional and over 80 district branches.
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