Bank of Uganda to Regulate Mortgage Refinancing Institutions Under New Bill
The Bank of Uganda is to regulate mortgage refinancing institutions following the Mortgage Refinance Institutions Bill, 2025. This bill legalizes Islamic mortgage refinance, mandates long-term funding for lenders, aims to make mortgages more affordable, and imposes strict penalties for non-compliance. The legislation is under review by the Committee on Finance, Planning and Economic Development.
The Bank of Uganda (BOU) is preparing to oversee the operations of mortgage refinancing institutions following the passage of the Mortgage Refinance Institutions Bill, 2025. This legislation mandates that the Central Bank must review and approve applications for Islamic mortgage refinancing. It stipulates that conducting mortgage refinance activities in Uganda without a license or Central Bank approval for Islamic refinancing is prohibited.
The Bill was presented for its first reading by the Honorable Martin Mugarra, Minister of State for Tourism, Wildlife and Antiquities, during a plenary session on March 12, 2025. Hon. Mugarra emphasized the absence of any existing laws governing mortgage refinance institutions, asserting the significance of these institutions in enhancing liquidity for financial services to facilitate long-term mortgages.
The Bill highlights that without mortgage refinancing institutions, primary mortgage lenders have relied heavily on customer deposits and short-term borrowings, leading to a mismatch in maturity. It mandates that these institutions provide long-term funding for at least five years, allowing primary lenders to better finance mortgages and address long-term credit needs.
The proposed legislation aims to lower mortgage costs significantly for the public by enabling primary mortgage lenders to offer more affordable interest rates and manageable repayment terms with extended grace periods. The Bill indicates that enacting these measures would ultimately enhance access to financing, thereby contributing to the availability of affordable housing in Uganda.
Moreover, the Bill stipulates stringent regulations for licensed mortgage refinancing institutions failing to commence operations within a year of licensure. It grants the Central Bank authority to revoke licenses after this period. Violations, such as operating without a license, can attract fines up to Shs10 million or result in imprisonment of up to seven years, with corporate entities facing penalties of Shs140 million.
Furthermore, mortgage refinance institutions are prohibited from granting credit to individuals other than primary mortgage lenders in good standing. The Committee on Finance, Planning and Economic Development will review the Bill and provide feedback to the legislative house within the next 45 days.
The Bank of Uganda will implement regulations for mortgage refinancing institutions through the Mortgage Refinance Institutions Bill, 2025. This legislation aims to enhance financing for primary mortgage lenders, offering lower interest rates and promoting affordable housing in Uganda. It also includes strict penalties for non-compliance and is currently under consideration by the relevant legislative committee.
Original Source: www.zawya.com
