Central Bank to regulate mortgage refinancing institutions

Bank of Uganda is set to regulate operations of mortgage refinancing institutions once the Mortgage Refinance Institutions Bill, 2025 is passed into law.

The Bill mandates the Central Bank to consider applications for approval to carry out Islamic mortgage refinance business.

“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 reads in part.

The Bill was tabled for its First Reading by the Minister of State for Tourism, Wildlife and Antiquities, Hon. Martin Mugarra during the plenary sitting on Wednesday, 12 March 2025.

“Currently, there is no law regulating the establishment of mortgage refinance institutions in Uganda. Mortgage refinance institutions play a key role in providing liquidity to financial institutions and microfinance deposit-taking institutions to enable them issue long-term mortgages,” Mugarra said.

The Bill states that in the absence of mortgage refinance institutions, primary mortgage lenders have continuously relied on customer deposits and other short term borrowing to finance their mortgages and other long term credit facilities, causing maturity mismatch.

“The Bill requires mortgage refinance institutions to provide long-term funding to primary mortgage lenders by re-financing or pre-financing mortgage portfolios for a long period of time of at least five years,” the Bill states.

According to the proposed law, long term lending will enable primary mortgage lenders to offer mortgages to the public at more affordable interest rates, manageable payment instalments, Iong-term payment durations and extending to borrowers, a grace period prior to repayment of the loan.

“Thus, the enactment of the Mortgage Refinance Institutions Bill, 2025 will lead to increased access to financing for primary mortgage lenders that in long term will have an effect of facilitating affordable housing in Uganda,” the Bill reads in part.

The proposed law is tough on licenced mortgage refinancing institutions that fail to commence business within a year of registration stating that, ‘where a licencee fails to commence a mortgage refinance business within 12 months from the date of issue of the license, the Central Bank shall revoke the licence’.

The Bill also imposes a fine of Shs10 million or a seven-year jail term, or both on an individual convicted of operating without a licence while a body corporate will be fined Shs140 million.

Mortgage refinance institutions refinance primary mortgage lenders and the Bill prohibits mortgage refinance institutions from offering credit facilities to any other person other than primary mortgage lenders that are in good standing.

The Committee on Finance, Planning and Economic Development will now consider the Bill and report back to the House within 45 days.