According to the Bank of Uganda (BoU) Financial Capability Survey (FCS) 2020 report, out of the 22.8 million working adults from 16 years and above, only 1 percent earn more than UGX. 1 Million (USD 270), while nearly 50% earn less than UGX. 150,000 (USD 40) in a month. Although the incidence of poverty has been higher in rural areas than in urban areas, some rural areas (which are mostly dominated by Muslims like East and West Nile sub-region) have been severely affected due to their fear of the great sin of riba (interests on credit).
In a bid to eradicate poverty among 68% of households across the country, Government of Uganda (GoU) has introduced various development programs, that among others, include Parish Development Model (PDM) a development approach conceived under the third National Development Plan (NDP III).
Notwithstanding the above intervention, at least 50% of Ugandans remain vulnerable to the risk of falling back into poverty in the next two years. Coupled on that, a big segment of the population that have deliberately neglected all the ongoing poverty alleviation programs due to their contradiction with tenets of the Islamic faith. According to the US government estimates in the midyear 2022, Uganda’s total population stood at 46.2 Million. These estimates further report that although the most recent (2014) census put Muslims at 14% of the population, the Uganda Muslim Supreme Council states that Muslims (primarily Sunni) are closer to 35% of the population.
Islamic Banking providing some Solution
Although Islamic banking has finally been rolled out in the commercial banking sector (after the Central Bank issuing the first Islamic banking license to Salaam Bank Limited), a big segment of the population (especially the poor) has remained financially excluded because; their communities are not reached by commercial banks or they lack collateral or their Microenterprises demand small magnitude of financing. This makes the establishment of Baitulmal Uganda inevitable to facilitate the Islamic Microfinance sector, which is perceived to be high-risk and unprofitable by commercial banks.
Establishment of Baitulmal Uganda
After observing the extreme poverty levels within the community that was caused by exclusion of Muslims from the financial services sector and the ongoing government development programs due to the fear of riba (interest). Baitulmal Uganda was established as an Islamic-based socio-economic development institution to complement government development programs by extending affordable Islamic financial services, service activities, and non-financial direct assistance to the active poor and productive entrepreneurs in the community.
