To streamline Uganda’s mortgage financing sector, the Central Bank has tabled before Parliament a Bill that seeks to protect borrowers’ properties from being attached.
The Mortgage Refinancing Institutions Bill 2025, which was tabled before the Parliament last week, states that collateral pledged by a primary mortgage lender to a mortgage refinance institution shall not be attached, assigned or transferred to satisfy any debt or claim.
In addition, the Bill also states that the primary mortgage lender shall not deal or transact with any collateral pledged to a mortgage refinance institution without the approval of the mortgage refinance institution.
This, however, comes with a clause which states that the approval shall not be unreasonably denied by the refinance institution.
Another clause states that a mortgage refinance institution shall not offer a credit facility to a primary mortgage lender unless the duration of the mortgage to be financed or pre-financed is at least five years; the interest rates or the equivalent under the Islamic mortgage refinance business is fixed for the duration of the credit facility; or any other condition as the Central Bank may prescribe by regulations.’
The proposed Bill, which sets the Minimum Capital at Shs35 billion, also makes it mandatory for operators of mortgage financing businesses to obtain a license from the Bank of Uganda.
As such, all individuals convicted of operating a mortgage financing business without a license will be required to pay Shs10M or imprisonment not exceeding seven years or both.
The Bill also sets a penalty of Shs140M as a fine for any company convicted of operating mortgage financing or Islamic mortgage refinance business without a license. Such a company shall also be disqualified from acquiring a license or approval if the Bill is passed into law.
Accordingly, the Bill, which was tabled for its first reading by the State Minister for Tourism, Martin Mugarra, on behalf of Finance Minister Matia Kasaija, mandates the Central Bank as the sole regulator for all mortgage refinancing institutions, with the discretion to consider applications for approval to carry out Islamic mortgage refinance business.
The Bill empowers the Bank of Uganda to revoke the operating license where an individual or institution fails to commence a mortgage refinance business twelve months after acquiring a license.
Operators of mortgage refinancing businesses will also be required to pay an annual fee prescribed by the Bank of Uganda before or on the 31st day of January each and failure to do so will attract a penalty.
In his brief to Parliament about the Bill, Minister Kasaija said there is no law regulating the establishment of mortgage refinance institutions in Uganda, yet they play a key role in providing liquidity to financial institutions and microfinance deposit-taking institutions to enable them to issue long-term mortgages.
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.
As such, 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 time of at least five years.
The Bill provides that long-term lending will enable primary mortgage lenders to offer mortgages to the public at more affordable interest rates, manageable payment instalments, long-term payment durations and extending to borrowers a grace period before repayment of the loan.