Uganda considers increasing Shs10m limit under  Deposit Protection Fund

The Government of Uganda is reviewing the threshold of Shs10 million that is secured for depositors under the Deposit Protection Fund (DPF).

The money is paid out to account holders in case the financial institution closes.

But Dr Julia Clare Olima Oyet, the Chief Executive Officer of DPF Uganda, said as the economy grows and the Fund expands, they are reviewing the threshold of Shs10 million to decide whether to increase or maintain it.

She said the laws provide for its review every five years.

“With that 10 million, we are covering 98 percent of depositors fully. But we’re doing research towards reviewing that ceiling because we cannot just increase it. What if we increase it and then we fail to pay,? It means to financial system will lose all the confidence,” Dr Oyet said.

She was speaking on Tuesday at the Conference and Annual General Meeting of the Africa Regional Committee of the International Association of Deposit Insurers (IADI), which brings together 14 member countries and associate members.

The committee provides and platform for deposit insurers financial safety net participants and international financial institutions to work together to promote best practices in the areas of deposit protection, bank resolution, and financial stability.

In hailing the decision of the Committee and IADI as a whole to bring the conference and AGM to Uganda, Dr Oyet, who is also the chairperson, said they will use the chance to not only showcase its ability to maintain a strong financial system but also exchange ideas with the agencies from the other countries.

She said that this year’s theme ‘’Ensuring Financial Stability and Protecting Depositors in a Dynamic Financial Ecosystem’’ is tailored to speak to the developments in the sector.

“The upheavals in the global financial system confirm and emphasize the importance of deposit insurance in protecting the small, vulnerable depositors who we refer to in Uganda as ‘Omuntu wa wansi’,” she said.

DPF Board Chairman, Mr. Ben Patrick Kagoro, highlighted the critical role of deposit insurance in safeguarding economies at the ARC Conference, 2024.

Finance Minister Matia Kasaija, who attended the function, said depositors holding accounts with different banks should rest assured that their money is insured against risks to the tune of 90%.

He reported that the Deposit Protection Fund’s assets have grown to beyond 1.4 trillion shillings up from 200 million shillings in 2018.

He said the main objective of the Deposit Protection Fund (DPF).is not just to pay the depositors of the affected bank but to give depositors, investors, and the general population the confidence and comfort that whatever happens, their deposits are safe.

Michael Atingi-Ego, the Deputy Governor of the Central Bank, said: “We recognize that the protection of depositors extends beyond the insurance threshold,” he says, adding, “For larger deposits, we have mechanisms in place – from purchase and assumption transactions to assisted mergers – to safeguard funds and maintain the integrity of our financial system.”

Atingi-Ego told the delegates that deposit protection funds are increasingly becoming more vital as the financial and economic environment keeps changing.

“As we look to the future, we face new challenges: the rapid evolution of financial technology, the increasing interconnectedness of global markets, and the ever-present threat of economic shocks require us to be ever-vigilant and adaptive.”