The Board Chairman of the Deposit Protection Fund of Uganda (DPF), Ben Patrick Kagoro, has called for a review of the current limit of Shs10 million for depositors.
Kagoro said barely two weeks after the former depositors of the liquidated Mercantile Credit Bank protested the delayed payment by the bank of Uganda.
Currently, the DPF currently provides protection of Shs10 million to the depositors of the 31 contributing institutions, made up of 22 commercial banks, six credit institutions, and three microfinance deposit-taking institutions.
The protected limit is reviewed every five years; therefore, the current limit is due for review this year, having been revised from Shs3 million in 2019. Under the review, they ought to increase it to Shs20 million.
Speaking at the Africa Regional Committee (ARC) of the International Association of Deposit Insurers (IADI) Conference, the majority of depositors across the African region are mostly the less sophisticated ones, the ones who are vulnerable and are therefore negatively impacted when a financial institution is closed.
“It is not a farfetched notion to assert that without ensuring financial stability and protecting depositors, the much-sought-after public confidence in the financial sector will remain but a distant dream,” he said.
He said Uganda is no exception to the upheavals and dynamism in the financial ecosystem. In the first half of the year, EFC Uganda Limited and Mercantile Credit Bank Limited were closed. We started paying depositors within days of the institution’s closure. This swiftness in reimbursing depositors is one of the cardinal principles of IADI, and it contributes immensely to public confidence in the financial sector.
Mercantile Credit Bank depositors at the crossroads
However, sources at the Bank of Uganda said the President Yoweri Museveni is hesitant to have them paid because the depositors of the Mercantile Credit Bank are the same who banked with EFC Uganda Limited, which was closed earlier this year.
A famous city pastor based in Rubaga areas is said to have had Shs27 billion in Mercantile and more than Shs17 billion in EFC. The president is quoted saying there is no reason they should be compensated because they invested in a risky business.
“We are not sure, but because Wazalendo is on the list with more than $13 billion, the president may have had these people paid in time, but he declined.”
“A renowned tour operator who married a non-Ugandan woman is also reported to have deposited $500,000 (Shs1.8 billion) late last year and never walked to the bank despite reports that it would be closed,” a source said.
The source said that even after the closure of the bank, he didn’t bother but instead ran to the president to report a BoU official for delayed payment. The president dismissed his allegation and directed him to wait because they ought to get their money back.
