Ugandans To Get Loans At Zero Interest

ambulance geneva; font-size: small;”>Finance Minister Hon Maria Kiwanuka told our Reporter on sidelines of a Local Investors’ Conference in Kampala on Friday that that Cabinet has approved this quest as part of government efforts to provide a favorable ground for investment and enhancement of the private sector.

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She noted that all along, the sector, especially proprietors of Small and Medium enterprises had cried foul over government’s failure to stabilize interest rates, leading to high costs of business startups and sustainability.

“We have known for long that the cost of procuring financing especially for SME’s has been incredibly high,” she said.

“There have also been concerns that as we edge closer to the EAC integration, our locally produced goods stood no chance of competing with those from our neighbors in the market thanks to the high cost at which they are produced.”

The new arrangement she said would be about banking in accordance with Islamic principles, which is already in operation in other countries like Britain and the US.


“One of the Islamic principles is that you are not allowed to charge interest. Instead of charging interest, commercial banks will have a stake in the loan itself, such that when you go to ask for a loan to start up a project, the bank becomes a partner in that project, and shares a small bit of its profits

This, she said, had been approved by cabinet two weeks ago, and that it is being drafted into the necessary legal language to be presented to parliament.

In addition to this, Kiwanuka revealed, Cabinet has passed a number of other measures aimed at providing affordable business financing, such as Loan insurance, where finance institutions will insure their loan and rest assured that their money will be repaid, as well as Agency and mobile money banking in which mobile money service providers will start giving out loans. All these will be regulated by Bank of Uganda.

“We want to ensure that banking institutions have no more reasons to hike their interest rates or deny giving out loans to our people.

“We have also set up a Financial Literacy Unit aimed at helping Ugandans become more conversant on how to apply for loans and get advice on when and why to. With all this, we will be able to accelerate growth of the private sector.”

With the environment finally set, she advised all Ugandans to be more investment-oriented and obtain as much business information as they can.

“We must make sure as Ugandans that when we borrow money, it is not for expenditure. If we borrow for weddings, and graduation ceremonies, wheat else should we expect?”

“And when we borrow for investment, let’s make a cost-benefit analysis. Don’t put up a shopping mall because your neighbor put up a shopping mall, or go into bakery because your sister is doing the same. Banks are very intelligent, they will look into all these proposals before processing your loans and if they don’t, you should not complain.”

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