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Why govt raised financial deposit insurance from Shs 3m to Shs 10m

Finance minister Matia Kasaija (R) unveils DPF to the media at Uganda Media Centre

Finance minister Matia Kasaija (R) unveils DPF to the media at Uganda Media Centre

The Uganda government recently raised the insurance cover on deposits in financial institutions from Shs 3 million to Shs 10 million. This concerns all types of accounts: savings, current and fixed deposit.

The Deposit Protection Fund of Uganda (DPF) is the government agency charged with insuring the safety of customers’ deposits in financial institutions.

The change was made in the financial year 2019/2020. This led to a wider catchment net that now fully covers 98 percent of the accounts in the concerned financial institutions. DPF insures depositors’ finances in three categories of deposit-taking financial institutions regulated by Bank of Uganda. These are commercial banks, credit institutions and microfinance deposit-taking institutions (MDIs). 

AFTER 20 YEARS

While announcing the new figure at the Uganda Media Centre in September 2019, the Minister of Finance, Planning and Economic Development, Matia Kasaija disclosed that the figure of Shs 3 million had been set in 1997 and was due for review because of the changes in the economy – such as inflation, changes in the exchange rate and growth in deposits – after more than 20 years.

These DPF member institutions, also called Contributing Institutions, are now 34 in number: 25 commercial banks, five credit institutions and four microfinance deposit-taking institutions.

If you have an account in any of these institutions listed below, then you can be sure it is protected, although customers are always advised to make sure that information regarding their accounts is updated with their bankers. The institutions contribute 0.2 per cent of all the deposits they collect annually.

Then the DPF invests this money in government securities. When the contributing institutions delay or fail to meet this obligation, they are penalized according to the law.

Updated information, especially the National ID and an alternative mode of payment, is useful because in the unlikely event of an institution having financial challenges and getting closed by authorities, the account owner would not face the inconveniences of delayed compensation. The compensation is supposed to be made within 90 days from the day of closure.

If a depositor has money exceeding Shs 10m on an account, the DPF will pay them Shs 10m and the rest will be paid by the liquidator after selling the assets of the closed institution; however, the amount paid by the liquidator will depend on the recoveries realized from the sale.

The Deposit Protection Fund of Uganda set up as an independent agency by the Financial Institutions Act 2004, which was amended in 2016, and was operationalized in 2017. The Fund’s Board was inaugurated by the Finance Minister.

The existence of the Fund creates confidence in the national financial sector and helps small unsophisticated depositors be certain that when they save their money, they will get up to Shs 10 million, in the unlikely event of a bank closure.

The contributing institutions of DPF, aka members, are:

(a) Commercial banks

1. Abc Bank

2. Absa Bank U Ltd

3. Afriland Bank (U) Ltd

4. Bank of Africa

5. Bank of Baroda

6. Bank of India

7. Cairo Bank Uganda Ltd

8. Centenary Bank

9. Citibank

10. Dfcu Bank

11.  Diamond Trust Bank

12.  Ecobank

13.  Equity Bank

14.  Exim Bank

15.  Finance Trust Bank Limited

16.  Guaranty Trust Bank

17.  Housing Finance Bank

18.  KCB Bank Uganda Ltd

19.  NCBA

20. Opportunity Bank

21. Orient Bank

22. Stanbic Bank (U) Ltd

23. Standard Chartered Bank

24. Tropical Bank

25 United Bank of Africa

(b) Credit institutions

1. Merchantile Credit Bank Ltd

2. Yako Microfinance Ltd

3. PostBank Uganda Ltd

4. Top Finance Bank Uganda Ltd

5. BRAC Uganda Ltd

(c) Microfinance deposit-taking institutions

1. EFC Ltd

2. Finca Uganda Ltd

3. Pride Microfinance Ltd

4.Ugafode Microfinance Ltd

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