Sovereignty Bill could trigger regulatory clashes – Bankers' body

KAMPALA - A draft law meant to shield Uganda’s sovereignty is stirring unease in the financial sector as the Uganda Bankers Association (UBA) warns it could quietly squeeze off the foreign funding that keeps credit flowing to businesses.

In a letter to the Attorney General seen by New Vision, Wilbroad Owor, the executive director at UBA says the Draft Protection of Sovereignty Bill, 2026, in its current form, risks slowing capital inflows, complicating routine banking operations, and unsettling investor confidence at a time when lenders are expected to expand credit to drive economic growth.

He said the bill’s sweeping definition of an “agent of a foreigner” as written, it could capture foreign-owned banks, institutions with overseas shareholders, and even routine correspondent banking relationships where Ugandan lenders process cross-border transactions.

“Carve-out for financial institutions licensed by the Central Bank of Uganda & Capital Markets Authority, as well as Development Finance Institutions operating in Uganda, from the agent of foreigner definition,” he advised government.

“Include a clear primacy clause affirming that Bank of Uganda's regulatory authority governs the banking sector supported by the Financial Intelligence Authority.”

The object of this Bill is to enact a law that seeks to provide for the protection of the sovereignty of the people of Uganda.

“Currently, Uganda has no specific law upholding the sovereignty of the country, which has resulted in continuous interference in the Government's policies and programmes by foreign countries and agents of foreigners. This threatens the nation's ability to self-govern without undue external interference,” the Bill by Kahinda Otafiire, Minister of Internal Affairs, reads in part.  

Clause 22, for instance, requires ministerial approval for foreign funding above about sh400m within 12 months. For banks, that threshold is strikingly low according to UBA. Typical funding lines from development finance institutions, syndicated loans, or capital injections from shareholders run far above that level.

Owor warns that this could undermine banks’ ability to meet capital requirements set by the central bank and constrain lending to sectors like trade and small business, which rely heavily on external credit lines.

The bill also places new obligations on supervised financial institutions handling cross-border payments. Banks would have to verify that recipients classified as “agents of foreigners” have ministerial clearance before processing transactions, and submit monthly reports to the Minister of Internal Affairs.

UBA said that it creates a parallel reporting line outside the existing framework overseen by the central bank and the Financial Intelligence Authority, effectively duplicating compliance requirements.