Government through the Ministry of Finance has proposed a fine of UGX140Million on corporate companies involved in mortgage refinancing business without a valid license.
This proposal is contained in The Mortgage Refinance Institutions Bill, 2025 that was tabled before Parliament in March 2025 by the Ministry of Finance. The Bill seeks to regulate the establishment of mortgage refinancing institutions; to provide for the functions of the central bank in relation to mortgage refinance business; to provide for the conduct of mortgage refinance business; to provide for corrective actions and liquidation.
Government also wants to impose a Shs35Bn minimum capital requirement for mortgage refinancing businesses.
Mortgage refinancing is a transaction that replaces an existing mortgage before it matures with a new one, on different mortgage terms. Refinancing is a financial tool that one can use to consolidate debt, get a lower interest rate and access the equity in your home to pay for other expenses.
In clause 14(1) of the Bill, Government is seeking to impose the minimum paid-up capital required for the establishment of a mortgage refinance institution at one million, seven hundred and fifty thousand currency points (Shs35Bn) invested initially in such liquid assets as the Central Bank may approve, but this figure is subject to revision by the Minister of Finance and Bank of Uganda.
“The minimum capital funds requirements for a mortgage refinance institution unimpaired by losses shall, at all times, not be less than the minimum paid- up capital prescribed in subsection (1). (3) The Minister may, in consultation with the central bank, by statutory instrument, revise the minimum paid-up capital referred to in subsection (1),” the Bill reads in part.
In clause 5 of The Mortgage Refinance Institutions Bill, 2025, Government is seeking to prohibit operating mortgage refinance business without licence noting in subclause (1); that a person shall not conduct a mortgage refinance business in Uganda without a licence or an approval in the case of islamic mortgage refinance business issued by the central bank in accordance with this Act.
Additionally, clause 5(2) of the Bill states; “A person who contravenes subsection (1) commits an offence and if that person is (a) an individual, is liable on conviction to a fine not exceeding five hundred currency points (UGX10Million) or to imprisonment not exceeding seven years or both; or (b) a body corporate, is liable on conviction to a fine not exceeding seven thousand currency points (UGX140Million).”
The Ministry of Finance also proposed in clause 5 (3) that a person convicted of an offence under subsection (2), shall immediately cease to carry out mortgage refinance business or Islamic mortgage refinance business and shall be disqualified from acquiring a licence or approval under this Act.
Government defended the enactment of the law arguing that currently, there is no law regulating the establishment of mortgage refinance institutions in Uganda, despite the key role the sector plays in providing liquidity to financial institutions and micro finance deposit-taking institutions to enable them issue long-term mortgages.
“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. Due to maturity mismatch, financial institutions and micro finance deposit-taking institutions limit their exposure to longer term loans in favour of short-term loans which has resulted into unfavourable mortgage terms,” the Bill further states.
Among the unfavourable loan terms listed by Government include;(a) high interest rates; (b) high payment instalments; (c) short payment durations; and (d) requiring borrowers to start repaying loans immediately.
In clause 7(4) of the Bill, Government is seeking to criminalise acts of individuals or corporate bodies furnishing false information in order to obtain mortgage refinancing license stipulating; “A person who, knowingly or recklessly furnishes a document or information which is false or misleading in connection with an application for a licence, commits an offence and is liable on conviction, to a fine not exceeding two hundred and fifty currency points or imprisonment not exceeding five years or both.”
In clause 24(1) of The Mortgage Refinance Institutions Bill, 2025, Government is seeking to limit shareholding in mortgage refinancing businesses where a person, body corporate controlled by one person, group of related persons or body corporate owned or controlled directly or indirectly by a group of related persons, shall not hold, whether directly or indirectly, more than twenty five percent of the shares of a mortgage refinance institution.
