The Bank of Uganda is poised to regulate mortgage refinancing institutions through the Mortgage Refinance Institutions Bill, 2025. The Bill mandates Central Bank approval for Islamic mortgage refinancing, addresses liquidity shortages in the market, and aims to improve the affordability of mortgages. Strict licensing requirements and penalties for non-compliance are included to ensure only properly registered entities operate within this space.
The Bank of Uganda (BOU) is preparing to regulate mortgage refinancing institutions through the anticipated Mortgage Refinance Institutions Bill, 2025. This legislation will require the Central Bank to approve applications for conducting Islamic mortgage refinance business, emphasizing that no organization can operate in this area without a proper license.
The Bill was introduced by Hon. Martin Mugarra during the plenary on March 12, 2025. It highlights the absence of existing regulations for mortgage refinance institutions, which are vital in supplying liquidity to financial entities. As a result, primary mortgage lenders often depend on customer deposits and short-term loans, leading to funding mismatches.
To address this, the Bill mandates that mortgage refinance institutions provide long-term funding solutions, enabling primary mortgage lenders to offer more competitive mortgages. This includes lower interest rates, manageable payments, and extended loan periods, ultimately aiming to enhance housing affordability across Uganda.
The Bill also sets strict conditions for licensed institutions, including the automatic revocation of licenses for those that do not initiate business within 12 months. Extreme penalties are stipulated for operating without a license, with fines up to Shs 140 million for corporations and up to Shs 10 million or seven years in prison for individuals.
Mortgage refinancing institutions are explicitly prohibited from extending credit to any parties other than primary mortgage lenders in good standing. Following its introduction, the Committee on Finance, Planning and Economic Development will evaluate the Bill and report back to Parliament within 45 days.
The Mortgage Refinance Institutions Bill, 2025, aims to establish a regulatory framework for mortgage refinancing institutions in Uganda, facilitating the provision of long-term financing to primary mortgage lenders. This can potentially lead to lower mortgage costs for consumers and heightened access to affordable housing. Additionally, the Bill enforces stringent licensing requirements and penalties for non-compliance, which should foster a more structured mortgage market.
Original Source: www.zawya.com
