Economy
Government Proposes UGX 35Bn Capital, Heavy Fines for Unlicensed Mortgage Refinance Companies
The Government of Uganda, through the Ministry of Finance, has proposed strict regulations for companies operating in the mortgage refinancing sector. Under the Mortgage Refinance Institutions Bill, 2025, corporate bodies running mortgage refinance businesses without a valid license could face fines of up to UGX 140 million. The Bill, tabled before Parliament in March, also seeks to regulate the establishment and operations of mortgage refinance institutions, define the role of the Central Bank in oversight, and provide for corrective actions, including liquidation.
One of the key proposals in the Bill is a minimum paid-up capital requirement of UGX 35 billion for any mortgage refinance institution. This capital must be invested in liquid assets approved by the Central Bank. The Minister of Finance, in consultation with the Bank of Uganda, may revise this threshold in the future. The Bill further requires that any person or company operating a mortgage refinance business must obtain a license or approval from the Central Bank. Individuals caught violating this rule could face fines up to UGX 10 million, imprisonment for up to seven years, or both. Corporate bodies face fines of UGX 140 million and immediate disqualification from obtaining a license.
The government says the new law is necessary because, currently, there is no legal framework regulating mortgage refinance institutions in Uganda. Without these institutions, primary mortgage lenders rely on short-term deposits to fund long-term loans, creating a “maturity mismatch.” This situation has led to high interest rates, large repayment instalments, short repayment periods, and borrowers being required to start repaying immediately. By establishing regulated mortgage refinance institutions, the government hopes to improve access to long-term credit and offer more favourable terms for borrowers.
The Bill also seeks to criminalise providing false or misleading information to obtain a mortgage refinancing license. Offenders could face fines up to UGX 5 billion, imprisonment for up to five years, or both. In addition, the Bill proposes limits on shareholding, stating that no single individual or related group can hold more than 25 per cent of shares in a mortgage refinance institution. This measure aims to ensure broader ownership and stronger governance of these institutions.
Mortgage refinancing allows homeowners to replace an existing mortgage with a new one under different terms. This can help borrowers consolidate debt, lower interest rates, or access equity in their homes for other expenses.
The government argues that these regulations will help create a more organised, transparent, and well-capitalised mortgage refinancing sector in Uganda. By doing so, financial institutions will be able to provide long-term loans more effectively, stabilize interest rates, and protect borrowers, ultimately strengthening the country’s housing and financial sectors. Parliament is expected to consider the Bill in the coming months.
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