Published on 18/08/2025
Ministry of Finance is seeking parliamentary approval to impose a UGX35 billion minimum and a UGX140 million fine for companies operating without a valid license.
These proposals are outlined in The Mortgage Refinance Institutions Bill, 2025, tabled in March 2025 to regulate the establishment and operations of mortgage refinancing institutions in Uganda.
The Bill aims to define the role of the Bank of Uganda in overseeing mortgage refinancing, establish operational guidelines, and outline corrective measures and liquidation processes. Under Clause 14(1), the minimum paid-up capital for a mortgage refinancing institution is set at 1,750,000 currency points (UGX35 billion), to be invested in liquid assets approved by the central bank.
The Minister of Finance, in consultation with the Bank of Uganda, may revise this amount via a statutory instrument. The Bill mandates that institutions maintain this capital unimpaired by losses at all times.
Clause 5 prohibits conducting mortgage refinancing business without a license or approval (for Islamic mortgage refinancing) issued by the Bank of Uganda. Violators face severe penalties: individuals could be fined up to 500 currency points (UGX10 million), imprisoned for up to seven years, or both, while corporate entities could face fines up to 7,000 currency points (UGX140 million). Convicted parties must cease operations immediately and are disqualified from obtaining a license under the Act.
The government justifies the Bill by highlighting the absence of regulations for mortgage refinancing institutions, which play a critical role in providing liquidity to financial and microfinance deposit-taking institutions for long-term mortgages.
Without such institutions, primary lenders rely on customer deposits and short-term borrowing, leading to maturity mismatches. This has resulted in unfavorable mortgage terms, including high interest rates, large installment payments, short repayment periods, and immediate repayment demands.
To ensure integrity, Clause 7(4) criminalizes providing false or misleading information to obtain a license, with penalties including fines up to 250 currency points (UGX5 million), imprisonment for up to five years, or both.
Clause 24(1) limits shareholding in mortgage refinancing businesses to 25% for individuals, single-controlled corporate bodies, or groups of related persons, though Clause 24(2) exempts the Government of Uganda, its agencies, or parastatals from this restriction.
The Bill also sets stringent criteria for individuals seeking to manage, control, or hold significant shares in mortgage refinancing institutions. Schedule 2 disqualifies anyone convicted of fraud, corruption, drug or human trafficking, tax crimes, money laundering, terrorism financing, or other offenses involving dishonesty or violence.
Additionally, individuals who have violated laws protecting the public from financial loss, served as directors of liquidated institutions, or engaged in deceitful or improper business practices are barred from leadership or ownership roles.
These measures aim to strengthen Uganda’s mortgage refinancing sector, ensuring stability and protecting consumers from exploitative practices.
