The High Court of Uganda has delivered a significant decision in Simbamanyo Estates v Equity Bank Uganda & 2 Others Civil Suit No. 198 of 2020 [2025], providing much-needed clarity for both local and international financial institutions on Uganda’s legal regulatory landscape for cross-border syndicated lending. The decision builds upon what was established in the earlier Supreme Court case of Ham Enterprises Ltd & 2 Others v Diamond Trust Bank(U)Ltd & Anor SCCA No. 13 of 2021[2023].

Reg. 6(1) of the Financial Institutions (Limits on Credit Concentration and Large Exposures) Regulations, 2005, prohibits institutions supervised by the Central Bank from extending credit to a single borrower exceeding 25% of their working capital. To finance large–scale projects, therefore, major corporate clients often must seek syndicated credit facilities from foreign lenders.

A syndicated loan involves two or more lenders providing separate loans to a borrower on common terms governed by a single loan agreement. This structure allows lenders to distribute risk and pool capital for loans that would be too large or risky for any single institution to undertake on its own, often to fund major infrastructure, energy and industrial ventures.

Background of the Case

Between 2012 and 2017, Simbamanyo Estates Ltd obtained loan facilities from a consortium of local and foreign financial institutions, ie Equity Bank Uganda, Equity Bank Kenya and Bank One Mauritius, to finance the development of a commercial building project. This arrangement was a classic example of syndicated lending.

Simbamanyo later instituted a suit challenging the entire mortgage process on grounds of fraud, misrepresentation and illegality. Among several issues for the court’s determination, two were paramount: Whether Ugandans (including entities) are prohibited by the Financial Institutions Act, Cap 57, from borrowing from foreign lenders, and whether the foreign lenders require a licence or approval from the Bank of Uganda to lend to Ugandan borrowers.

Court’s Decision:

The High Court’s findings were clear and decisive;

i. On the legality of foreign lending:
The court held that the Foreign Institutions Act doesn’t prohibit Ugandans (including entities) from borrowing from foreign institutions, nor does it forbid foreign institutions from lending to Ugandans. Relying on the observation made in Ham v DTB, the court clarified that the Act regulates only financial institutions which are “licensed to conduct financial institution business in Uganda”. With reference to the Bank of Uganda’s guidance, financial institution business concerning extending credit issuance refers to where such “lending is from money deposited with the financial institution by its customers”.

Foreign institutions lending to Ugandans operate outside this scope. They are not regulated by the Bank of Uganda but are instead governed by the financial laws of their home countries and the principles of contract law. Consequently, they are not required to obtain a license from the Central Bank or establish a physical office in Uganda to advance credit.

ii. On syndicated lending:
The court referred to the definition of syndicated lending provided in Ham v DTB, recognising it as a lawful and established global commercial practice. It acknowledged the necessity of this mechanism for enabling large-scale financing while allowing financial institutions to manage risk and comply with regulatory exposure limits. The practice is subject to the agreed-upon terms of the contract governing the syndicate.

Conclusion

This decision, together with the earlier Ham v DTB decision, firmly establish that cross-border lending is permissible and enforceable in Uganda. This legal certainty reinforces the legitimacy of syndicated lending and gives foreign lenders confidence to participate in the Ugandan market, with assurance of judication support in recovery efforts should a default occur.

While this decision clarifies the current legal position, the development of a specific statutory framework for cross-border lending could further enhance the market. Such a framework could prioritise clarity, transparency and minimal regulatory friction to avoid deterring foreign capital. If a licensing regime were ever introduced, its procedures should be straightforward, acknowledging that foreign lenders are already subject to robust regulation in their countries of origin.