Kampala, Uganda – The government has increased the deposit insurance limit from the current 3 million to 10 million shillings. This is the amount of money that is put aside to cater for misfortunes like the closure of a bank, as a guarantee that depositors can be refunded to that limit.
This money is kept by the Deposit Protection Fund, an independent agency created under the Financial Institutions Act, 2004. The Fund, previously under Bank of Uganda, was operationalized in 2017 after the enactment of the Public Finance Management Act, 2016.
The increment in the insurance limit means that if a bank collapses and you had deposited there 10 million, all your money will be refunded from the fund. But if you had deposited 20 million Shillings, you will only be entitled to the insured amount of 10 million Shillings.
Finance minister Matia Kasaija told reporters at the Uganda Media Centre today that the decision had been taken after considering the changing environment, including inflation, the exchange rate and growth of deposits in the banks.
Kasaija said it is a cushion that people who have saved their money must get justice in case a bank or financial institution has closed. This creates confidence in the financial sector and helps people to be certain that when they save their money, they will get it back.
The money in the deposit protection fund is contributed by commercial banks credit institutions and microfinance deposit-taking institutions. These institutions contribute 0.2 per cent of all the deposits they collect annually said Wilbrod Owor, the executive director of the Uganda Bankers’ Association (UBA).
This will not change, he added. Therefore, this will not affect financial institutions finances. The Fund now is headed by Julia Clare Olima Oyet as the executive director and Patrick Kagoro as the board chairperson.