The Bank of Uganda will regulate mortgage refinancing institutions once the Mortgage Refinance Institutions Bill, 2025 is enacted. The Bill mandates licensing and approval for Islamic mortgage businesses and aims to improve funding for primary mortgage lenders, ultimately facilitating affordable housing in Uganda while imposing strict penalties for non-compliance.
The Bank of Uganda (BOU) is poised to regulate mortgage refinancing institutions following the anticipated passing of the Mortgage Refinance Institutions Bill, 2025. This legislation aims to require licensing and approval for Islamic mortgage refinance businesses, ensuring that no entity operates in this capacity without proper authorization from the Central Bank.
Introduced by Hon. Martin Mugarra, Minister of State for Tourism, Wildlife and Antiquities, the Bill was presented for its First Reading on 12 March 2025. Currently, Uganda lacks a regulatory framework for mortgage refinance institutions, which are crucial as they provide liquidity to financial entities, enabling them to issue long-term mortgages.
The Bill addresses a significant gap, as primary mortgage lenders have depended on customer deposits and short-term borrowing, creating inconsistencies in financing. To mitigate this, the Bill mandates that mortgage refinance institutions supply long-term funds to primary lenders, facilitating mortgage portfolios for a minimum of five years.
Such provisions are expected to lower interest rates and provide more manageable payment terms for borrowers, ultimately improving access to financing and promoting affordable housing in Uganda with the Bill’s enactment.
Moreover, the legislation is stringent in its requirements; if a licensed institution does not begin operations within a year, the Central Bank is authorized to revoke its license. The Bill also prescribes severe penalties for non-compliance, including fines and imprisonment for individuals operating without a license, alongside significant financial penalties for corporate entities.
The proposed Bill prohibits mortgage refinance institutions from extending credit to anyone other than primary lenders who maintain good standing. The Committee on Finance, Planning, and Economic Development will now review the Bill and report back to the House within 45 days, setting the stage for regulatory reforms in Uganda’s mortgage sector.
The Mortgage Refinance Institutions Bill, 2025 represents a critical development in the regulatory landscape for mortgage refinancing in Uganda. By establishing clear guidelines and penalties, as well as enabling better financing options for primary lenders, the Bill aims to enhance the accessibility and affordability of housing for Ugandans. As this legislative proposal moves forward, its implications will be significant for the mortgage industry and housing sector in Uganda.
Original Source: www.zawya.com
