ANALYSIS OF THE MORTGAGE REFINANCE INSTITUTIONS ACT, 2026

By: Timothy Mwesigwa (Senior Associate) & Valentine Apio (Legal Assistant)

In February 2026, Uganda passed the Mortgage Refinance Institutions Bill to tackle high housing costs by establishing Mortgage Refinance Institutions (MRIs). These entities aim to provide low-cost capital to primary mortgage lenders, which helps reduce interest rates and improve loan terms for borrowers. This reform seeks to enhance access to home loans and aligns Uganda with global practices that support housing finance market development and economic growth.
This article explores the key features of the Mortgage Refinance Institutions Act, 2026 (MRI Act/the Act) as well as the implications of this development for credit institutions.

What is mortgage refinancing?
A legal process by which existing mortgage facilities are replaced with new ones, typically to take advantage of more favorable terms such as lower interest rates, lower monthly payments or a more suitable term length through revision and/or consolidation of debt among other methods.1 The Mortgage Refinance Institutions Act, 2026 expands the scope of Mortgage refinance business to include refinancing, which entails buying off existing mortgage portfolios from primary mortgage lenders; prefinancing- where credit is extended to primary mortgage lenders in advance for the sole purpose of mortgage-lending on more favorable terms; and issuance of mortgage-backed bonds, notes or other financial instruments to the public to raise capital for the foregoing.2

KEY FEATURES OF THE MRI ACT

Qualifications for Mortgage Refinance Institutions
Any person or entity seeking to conduct mortgage refinancing business must obtain a licence from the Central Bank . Additionally, it must be a company incorporated in Uganda as one limited by shares with a minimum capital requirement of UGX 35 billion. The directors, shareholders and managers must pass the fit and proper test which includes an analysis of past directorships, criminal records and professional disciplinary history. The MRI Act also provides for Islamic Mortgage Refinance conducted in accordance with the principles of Shari’ah law, for which an MRI must secure separate approval from the central bank.

Ownership & Governance of MRIs
Governance: MRIs are required to be governed and managed by persons of high integrity and moral standing, sound judgment and possessing the professional competence to conduct MRI business. In ascertaining this, the regulator considers the criminal, management and financial track record of any proposed director, manager or shareholder; wherein antecedents of corruption, bankruptcy, fraud, causing financial loss among others would disqualify one from governance of an MRI.

Ownership: an individual, a group of related individuals, or a corporate entity controlled by one person or a group of related individuals is restricted from holding more than 25% of shares in a MRI, unless the controlling person or group is the government of Uganda or a parastatal agency. Additionally, any individual, group of related individuals, or corporate entity intending to acquire more than 10% of shares in a MRI must seek approval from the central bank.

Business of MRIs
An MRI is required to maintain a minimum capital of Ugx 35 billion at all times and to have sufficient liquid assets to meet its financial obligations. They are permitted to invest in government treasury securities, fixed deposits with Bank of Uganda-licensed financial institutions and Shari’ah-compliant investments, as well as any other instruments that the central bank may authorize.

MRIs are strictly mandated to lend only to a select group of primary mortgage lenders (PMLs) that are in good standing as outlined under the Act. These include:
• Financial institutions such as banks
• Microfinance Deposit-Taking Institutions (MDIs)
• Islamic financial institutions
• SACCOs
N.B. All the above PMLs must be regulated by the central bank, which is authorized to gazette any other entities as primary mortgage lenders.
Conversely, the Act restricts MRIs from taking deposits, issuing credit to entities which are not recognized as PMLs and from purchasing and/or refinancing non-performing mortgages. MRIs may not invest in any venture not permitted by the Act, engage in activities which incur forex or equity risks nor create a subsidiary without authorization of the central bank. In the course of lending, MRIs are prohibited from advancing credit where the collateral does not meet the criteria set by the Act. Permitted collateral includes liens over or assignments of a portfolio of first-ranking charges or mortgages which are not in arrears, debt instruments issued by the government of Uganda, fixed cash deposits or any other collateral approved by the central bank. 
PMLs such as banks, MDIs or SACCOs are also prohibited from applying MRI credit towards any other purpose than mortgage prefinance, refinance or purchase of mortgage portfolios from other PMLs. Additionally, PMLs are restricted from dealing or transacting with any collateral pledged to an MRI for mortgage refinance purposes except with the approval of the MRI.
 
Conditions for MRI lending
The MRI Act only permits MRIs to lend to prescribed primary mortgage lenders as discussed above; for mortgages whose term is five (5) years and above, and where the interest or its equivalent in Islamic mortgage refinance is fixed for the duration of the credit facility.
 
Oversight & Regulation
The Act vests regulatory powers over MRIs in the Central Bank, that is, the Bank of Uganda; which has the mandate to grant licenses & approvals for MRI and Islamic MRI business, to vet shareholders, managers & directors of MRIs, issue regulations & guidelines for operationalization of the Act and approve underwriting standards for MRI business among others.
The supervisory powers extend to the inspection of MRI records, review of regular mandatory reports by MRIs, oversight over mergers and acquisitions of MRIs; sanctioning & penalizing or even intervention in the management of MRIs where there is mismanagement or non-compliance with the law as well as oversight over the winding up of MRIs in the event of insolvency.
 

IMPLICATIONS FOR FINANCIAL INSTITUTIONS (F.Is) IN UGANDA

Long-term Funding: Financial institutions stand to gain access to long-term funding, which will enable them to expand mortgage portfolios and reduce reliance on short-term deposits. This fundamentally strengthens balance sheets and enhances financial intermediation.
Lower interest rates: with financing from MRIs, banks and other F.Is can offer lower interest rates and attract more mortgage borrowers. This could potentially increase mortgage uptake in a country where mortgage penetration is currently very low, standing at less than 1% of the GDP.

Empowering smaller Lenders: Access to refinancing will level the playing field between large and small lenders. Before the Act, only Commercial Banks with substantial deposit bases could comfortably sustain long-term mortgage lending. However, with the new law, smaller lenders such as SACCOs and microfinance institutions can now access long-term mortgage liquidity and refinancing opportunities that were previously dominated by larger financial institutions.

Islamic/Sharia law considerations: The new law will enhance housing finance access for Muslims, who often avoid conventional mortgages due to the prohibition of interest (riba) in Islam. Islamic mortgage refinancing options, such as cost-plus financing (Murabaha), lease-to-own (Ijara), and partnership financing (Musharaka), provide alternatives. This formal recognition may also attract Middle Eastern investors and sovereign wealth funds to Uganda, as clear legal frameworks for Shari’ah-compliant mortgages become established.

Strategic alignment: Financial institutions must strategically align their internal processes and operations with the standards established under the MRI Act to fully benefit from this new scheme. This alignment includes ensuring compliance with all regulatory requirements to maintain good standing, revising mortgage documents to accommodate refinancing options, enhancing risk management practices to ensure that available collateral qualifies for refinancing, and strengthening internal systems to guarantee that their mortgage portfolios meet the stipulated criteria.

CONCLUSION

In conclusion, the introduction of the Mortgage Refinance Institutions Act, 2026 represents a significant advancement in the evolution of Uganda’s housing finance sector. By establishing a framework for mortgage refinancing, the Act aims to foster a more sustainable, affordable, and inclusive mortgage market. However, the ultimate success of the Act hinges on effective implementation and the commitment of stakeholders to align their practices with the new legal framework.
The Act also empowers the Central Bank to issue Regulations that will operationalize key provisions, thereby enhancing its effectiveness and ensuring the enforcement of the primary statutes. Once fully implemented, these laws are anticipated to bring about reforms that will broaden access to home ownership for citizens and strengthen the mortgage market for Primary Mortgage Lenders.

END

1Section 5 & 6 of the Act

2Steven Katende, “Strengthening Uganda’s Housing and Construction Ecosystem: Economic Implications od the New 2025 Laws”, Published on March 9 2026 https://eprcug.org/blog/strengthening-ugandas-housing-and-construction-ecosystem-economic-implications-of-the-new-2025-laws/?utm_source