Central bank tasked to stop mortgages on public land

Kampala, Uganda | THE INDEPENDENT | The Chairperson of the Commission of Inquiry into Land Matters Justice Catherine Bamugemereire has asked the Central Bank to intervene in the issuance of mortgages on reserve land like forests and wetlands.

Bamugemereire’s plea is based on reports that chunks of government land have been mortgaged by individuals and often taken over by commercial banks. One of the cases involves Kajjansi Forest Reserve which mortgaged by businessman Ephraim Ntaganda to acquire a loan of USD 3 million (Over 11 billion shillings).

Bamugemereire advised that Bank of Uganda should intervene to ensure that commercial banks take proper collateral. She was speaking during an interaction with Bank of Uganda legal counsel Margaret Kaggwa Kasule on banking issues that relate to loans and land transactions.

According to Kasule, bad collateral that results from double titling of land, multiple ownership interests on land and poor valuation of the land is still a major challenge for commercial banks.

She, however, cautioned that Commercial banks must ensure that they take proper security while dealing with loan applicants, adding that Bank of Uganda cannot supervise day-to-day activities like loan transactions.

Kasule added that valuer’s should also be held responsible for not carrying out a proper search before endorsing such land as for collateral.  She suggests that the government comes up with a proper valuation system that includes procedures and penalties for valuer’s who do not conduct proper searches and valuation of property used as collateral.

Commissioner George Bagonza, however, advised the central bank to come up with more stringent guidelines on collateral for Commercial banks and set tight guidelines for loan acquisition. He further suggested that BoU also intervenes on the matter of valuation to improve financial service delivery in the country.

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