The Bank of Uganda plans to regulate mortgage refinancing with the Mortgage Refinance Institutions Bill, 2025. This Bill mandates licensing for Islamic mortgage operations and aims to provide stable long-term funding for primary lenders. It sets penalties for non-compliance and seeks to improve housing affordability in Uganda.
The Bank of Uganda (BOU) is poised to regulate mortgage refinancing institutions following the anticipated passage of the Mortgage Refinance Institutions Bill, 2025. This legislation will empower the Central Bank to approve applications for Islamic mortgage refinance business, thereby ensuring that no individual may conduct such business without the corresponding license from the Central Bank.
The Bill was first introduced by Hon. Martin Mugarra, Minister of State for Tourism, Wildlife and Antiquities, during a plenary session on March 12, 2025. He emphasized that the absence of regulatory frameworks for mortgage refinance institutions has hindered the ability of primary mortgage lenders to provide long-term financing, relying instead on short-term deposits.
In the absence of these institutions, primary mortgage lenders have experienced maturity mismatches, financing long-term loans through short-term borrowing. The proposed legislation aims to rectify this by mandating mortgage refinance institutions to finance primary mortgage lenders in a sustainable manner, requiring long-term funding arrangements of at least five years.
The Bill will promote more affordable mortgage options for the public by allowing primary lenders to extend clearer repayment terms, including lower interest rates and grace periods. This enactment is expected to significantly improve access to affordable housing financing in Uganda.
Moreover, the legislation stipulates strict consequences for licensed institutions that fail to commence operations within a year, including license revocation by the Central Bank. Additionally, penalties of Shs10 million or a potential seven-year imprisonment will be imposed for operations conducted without a license, while corporate offenders may face fines up to Shs140 million.
The Bill further specifies that mortgage refinancing institutions may only provide credit to reputable primary mortgage lenders, thus enhancing the stability and reliability of the mortgage market in Uganda. The Committee on Finance, Planning and Economic Development is tasked with reviewing the Bill and reporting back to Parliament within 45 days.
In conclusion, the Mortgage Refinance Institutions Bill, 2025 is a strategic legislative effort aimed at regulating mortgage refinancing institutions in Uganda. By ensuring that operations are conducted under strict licensing, the Bill seeks to enhance the financial stability of primary mortgage lenders and facilitate access to affordable housing. With clearer guidelines and penalties for non-compliance, the enactment of this law promises to positively impact the mortgage sector.
Original Source: www.zawya.com
