The Bank of Uganda will oversee mortgage refinancing institutions once the Mortgage Refinance Institutions Bill, 2025 becomes law. The Bill also grants the Central Bank authority to approve applications for Islamic mortgage refinancing.
"A person shall not conduct a mortgage refinance business in Uganda without a licence or an approval in the case of Islamic mortgage refinance business issued by the Central Bank in accordance with this Act," the Bill states.
The Minister of State for Tourism, Wildlife and Antiquities, Martin Mugarra, tabled the Bill for its First Reading during a plenary sitting on March 12, 2025.
"Currently, there is no law regulating mortgage refinance institutions in Uganda. These institutions play a key role in providing liquidity to financial and microfinance deposit-taking institutions, enabling them to issue long-term mortgages," Mugarra said.
The Bill highlights that in the absence of mortgage refinance institutions, lenders have relied on customer deposits and short-term borrowing to finance mortgages, leading to a maturity mismatch.
It proposes that mortgage refinance institutions provide long-term funding to primary mortgage lenders by refinancing or pre-financing mortgage portfolios for at least five years.
According to the Bill, long-term lending will enable primary mortgage lenders to offer affordable interest rates, manageable payment instalments, extended repayment durations, and grace periods before loan repayment begins.
"The enactment of the Mortgage Refinance Institutions Bill, 2025, will increase access to financing for primary mortgage lenders, ultimately facilitating affordable housing in Uganda," the Bill states.
Strict penalties for unlicensed mortgage refinancing institutions
The proposed law imposes strict penalties on institutions that fail to commence operations within a year of registration.
"Where a licensee fails to commence a mortgage refinance business within 12 months from the date of issue of the licence, the Central Bank shall revoke the licence," the Bill states.
Operating without a licence will attract a Shs10 million fine or a seven-year jail term, or both. Corporate offenders will face a Shs140 million fine.
Additionally, mortgage refinance institutions will be prohibited from offering credit to any entity other than primary mortgage lenders in good standing.
The Committee on Finance, Planning, and Economic Development will now review the Bill and present its findings to Parliament within 45 days.
