IADI REGIONAL WORKSHOP ON

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• IADI REGIONAL WORKSHOP ON
• DIS COVERAGE PUBLIC AWARENESS AUGUST 13TH -
  15TH 2008
• ABUJA, NIGERIA

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• DETERMINATION OF DEPOSIT INSURANCE COVERAGE LIMIT
• The experience of Kenya
• Presented By S.N. ALING - DPFB

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• Outline
• Introduction/Establishment of the Fund Board
• Objectives Mandates
• Membership of the Fund
• Funding
• Coverage
• Challenges

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• Introduction
• Deposit Protection Fund Board (DPFB) is a
  body corporate established under Section 36 of
  the Banking Act CAP 488 of the Laws of Kenya.

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• Introduction (Contd.)
• Established in 1985 following the banking crisis
  of the early eighties which caused major losses
  to depositors.
• Found necessary to stem further erosion of
  confidence in the sector.
• Cushion small depositors who were the most
  affected.
• Concept of a contributory scheme of insurance.
• Members of scheme - all licensed deposit taking
  financial institutions.

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• Introduction (Contd.)
• Insured deposits maximum of Ksh.100,000
  (approx.US1,400) per depositor.
• Operations commenced on 1st September, 1986.
• Initial activities were establishment of
  administrative and operational procedures viz
  laying the foundation, capacity building and
  funding.
• Effective operations started 1989.

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• Objectives and Mandate
• Provides a deposit insurance scheme for customers
  of member institutuions
• Enhance public confidence in the financial sector
• Promote Financial Stability
• Encourage Savings and promote economic growth
• Bank resolutions and winding up
• Holds, manages and applies the fund to provide
  deposit insurance

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• Membership of the Fund
• Membership is mandatory for all institutions
  licensed to carry on business under the Banking
  Act.
• Membership as at 30th June 2008 (43 commercial
  banks and 2 mortgage finance companies).
• All members pay flat-rate contribution based on
  the average deposit
• of the previous 12 months.
• The Fund can cease membership of an institution
  if its activities and conduct are detrimental to
  the interest of the Fund and its members.

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• Funding
• Annual premium levied from member institutions at
  0.15 of the average deposit during the 12 months
  prior to notice or Kshs.300,000 (USD4,255)
  whichever is higher.
• Government Grants
• Borrowings from the Central Bank of Kenya
• Investment incomes (interest from government
  securities)

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• Coverage
• Coverage level of upto Ksh.100,000 (USD1,370) to
  each depositor of a member institution.
• 89 of all deposit accounts were fully covered as
  at 30th June 2008. This translates to 14.5 of
  all total deposits in value terms.
• The coverage level is in line with the public
  policy objective to protect largely small
  depositors.

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• Challenges
• To effectively reach out to all depositors on
  payment of the insured amount.
• Lack of autonomy Though we are currently in the
  process
• of drafting a new act that will herald
  independence of DPFB.

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• End of Presentation