The Kenya Deposit Insurance Corporation (KDIC) has announced the implementation of the raised deposit insurance coverage of KSh 500,000 from KSh100,000 aimed at compensating depositors in case of a bank collapse. The coverage limit was revised last year but its implementation was deferred. KDIC said the limit was made to reflect the growth in Kenya’s economy and will now be enforced beginning 1st July 2020 in line with the government’s initiatives to revive the economy and support the banking industry and Kenyans cruise through the challenges occasioned by the COVID-19 pandemic.
In the unlikely event of a failure of a member banking institution, KDIC will now guarantee payment of up to a maximum of Kshs.500, 000.000 (USD 5000) per depositor irrespective of the number of deposit accounts held in the institution, meaning where a depositor has more than one account in an institution, all the accounts are consolidated and paid up to a maximum insured sum of Kshs. 500,000.00.
The corporation which its members include 41 commercial banks, one mortgage finance company, and 13 Microfinance banks licensed by the Central Bank of Kenya has since played a key role in the stability and effectiveness of the Kenyan financial system. These institutions are required to pay their annual deposit insurance premiums in the month of July. Due to the global pandemic, KDIC has announced the extension of the payment of the premium for six months. The member institutions will now be required to remit their payments at the end of December 2020.
The Kenya Deposit Insurance Corporation (KDIC) has also suspended the implementation of the July risk-based premium model by one year. The model is to be used to assess the premium payable by the member banks
“In support of our member institutions during these unprecedented times which may have impacted on their cash flows, the corporation has postponed the implementation of the model which was due in July by one year. This will allow our institutions to recover post-COVID-19,” said Chief Executive Officer, Mohamud Ahmed Mohamud in a press letter.
In 1989, the government of Kenya established the Deposit Insurance System (DIS), which is being now run by the Kenya Deposit Insurance Corporation with an aim of protecting and compensating small, vulnerable and unsophisticated depositors of collapsed institutions and to boost the public confidence of the country’s banking industry which had been rocked by uncertainties and insecurities which came about due to crumbling of some financial institutions in the early years. KDIC covers Current Accounts, Savings Accounts, Fixed Deposit Accounts, and Foreign Currency Deposits.
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