The Government of Uganda (GoU) through The Microfinance Support Centre Limited (MSC) in partnership with the Islamic Development Bank (IDB) will soon launch Islamic micro financing models in Uganda. This is part of the Rural Income and Employment Enhancement Project (RIEEP) implemented by MSC on behalf of the Government of Uganda and will take effect in the in the financial year 2016/2017. MSC is the implementing unit and is working together with the Ministry of Finance, Planning and Economic Development in preparation for the launch the Islamic micro financing models.
MSC has engaged a team from Bank of Khartoum - Sudan where the models are practiced to support in developing products relevant to Uganda and setting up of a framework in which these models will be implemented.
Between 2013 and 2015, MSC together with officials from IDB and a consultant from Sudan visited and profiled potential projects and client institutions to be funded using Islamic Financing model the first in Uganda. The projects are spread throughout the country and each project is designed to benefit between 1,000 and 5,000 people. These are mainly agricultural based processing and manufacturing projects. Islamic Financing model thrives mainly on Co-operative Union setups which have primary Cooperative thus benefiting many community members.
Training and study visits to Sudan and Bangladesh Islamic projects have been undertaken by Ministry of Finance, Planning and Economic Development officials and MSC.
There are five major Islamic microfinance models but MSC will commence with three namely; Musharaka, Mudaraba and Murabaha
This is a partnership based model where the financing institution invests with the client Share out profits and losses.
This is another partnership model where one partner (Financing Institution/Rab al Mal) contributes capital and the other (client/mudarib) contributes his or her skills to the venture.
It is a trade based contract wherein the institution. Upon request the financing entity purchases an asset from the third party usually a supplier and resells the same to the client either against immediate payment or on a deferred payment basis. This model is similar to Asset financing.