The Bank of Uganda is set to regulate mortgage refinancing institutions through the Mortgage Refinance Institutions Bill, 2025, which mandates licensing by the Central Bank. The Bill aims to improve liquidity for primary mortgage lenders, ultimately facilitating affordable housing. It includes provisions for penalties against non-compliance and emphasizes long-term funding for mortgages.
The Bank of Uganda (BOU) is poised to regulate mortgage refinancing institutions through the anticipated Mortgage Refinance Institutions Bill, 2025. This legislation will empower the Central Bank to assess applications for Islamic mortgage refinance licenses. According to the Bill, entities must obtain a license from the Central Bank to operate mortgage refinance businesses in Uganda.
Presented by Hon. Martin Mugarra, Minister of State for Tourism, Wildlife and Antiquities, during the plenary on March 12, 2025, the Bill addresses the absence of a legal framework governing mortgage refinance institutions. It underscores their pivotal role in supplying liquidity to financial institutions, enabling them to extend long-term mortgages.
The Bill highlights the dependence of primary mortgage lenders on customer deposits and short-term financing, leading to maturity mismatches. To remedy this, mortgage refinance institutions will be mandated to offer long-term funding by refinancing or pre-financing mortgage portfolios for a minimum duration of five years.
Under the proposed law, long-term lending will enhance the ability of primary mortgage lenders to provide mortgages at more competitive interest rates, with manageable payments and extended repayment schedules. The enactment of the Mortgage Refinance Institutions Bill is expected to significantly improve access to financing for primary mortgage lenders and, consequently, boost affordable housing in Uganda.
Furthermore, the Bill imposes strict regulations on licensed mortgage refinancing institutions that do not commence business within a year, stipulating that their license will be revoked by the Central Bank. It also sets severe penalties for operating without a license, including fines or imprisonment.
Mortgage refinance institutions are restricted from offering credit to anyone other than compliant primary mortgage lenders. The Committee on Finance, Planning and Economic Development will review the Bill and provide a report to the House within 45 days.
In summary, the Mortgage Refinance Institutions Bill, 2025 represents a significant step towards regulating mortgage refinancing activities in Uganda. It aims to enhance liquidity for financial institutions, improve the affordability and accessibility of mortgages, and address critical issues related to maturity mismatches in financing. The proposed legislation enforces stringent penalties for non-compliance and strives to create a structured framework for the mortgage industry in Uganda.
Original Source: www.zawya.com
