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The Deposit Protection Fund of Uganda (DPF), also referred to as the Fund, was established as a legal entity following the enactment of the Financial Institutions (Amendment) Act, 2016.

Frequently Asked Questions (FAQS)

A Contributing Institution is one, which is licensed by Bank of Uganda and periodically pays premiums to the DPF. These include Commercial banks, Credit Institutions and Microfinance Deposit-Taking Institutions.

Depositors can know that their bank is protected by the DPF by looking out for the license that Bank of Uganda issued to their bank/Institution which is usually displayed in the banking hall.

All depositors of Contributing Institutions are protected by the DPF.

Depositors of Contributing Institutions should know that DPF is a Government of Uganda Agency which was established with the primary purpose of protecting their deposits, and will therefore pay them up to UGX 10 million in the unlikely event that their bank fails/closes. As such, depositors who have less than or equal to UGX 10 million should be confident that they will be paid promptly in case their bank is closed. Those who have more than the UGX 10 million will be paid the excess from the liquidation proceeds.

All Contributing Institutions maintain a record of their depositors and they share this information with the Fund periodically.  The Fund will use this information to pay depositors through their mobile money accounts or alternative bank accounts. Customers who have not given this information to their respective banks will be asked by the DPF to submit this to the payout agent. The payout agent will be one of the banks that are operating in the country.

Steps would be taken to confirm that the depositor was the owner of the account, and this would create a delay in payout to the depositor. This will include making a physical appearance at the Fund. This could present a lot of inconveniences to the depositor.

Deposits above the insured limit will be paid by the liquidator after the assets of the closed Contributing Institution have been sold off. The amount paid out will depend on the recoveries made.

According to the Financial Institutions Act, 2004 as amended, depositors shall be paid within ninety (90) days of closure of the Contributing Institution. Nevertheless, DPF will ensure that depositors get their money earlier than the time provided for in the law. However, this will depend on whether DPF has up-dated depositor records, hence the need to up-date the same.

DPF covers per depositor and not per account. Therefore, the Contributing Institution would amalgamate the two personal accounts and the depositor would be paid up to UGX 10 million after removing any non-performing loans.

  1. Premiums: All Contributing Institutions make annual premium payments to the Fund.
  2. Investment Income: The contributions are invested in Government of Uganda treasury instruments, and this helps to grow the Fund size.

  1. The money received from Contributing Institutions is deposited on an account held at Bank of Uganda.
  2. This money is then invested in assets with minimal risks such as Government of Uganda treasury bills and bonds. The income from the investment is reinvested.

After the passing of the National Payments Systems Act, mobile money accounts are now protected through a ‘ring fencing’ arrangement. This requires banks to invest the funds they hold in respect to mobile money in easily liquidated instruments like Government of Uganda treasury bills and bonds. In the event a telecom company closes, the mobile money account holders will be reimbursed in full using the proceeds from the treasury bills and bonds.

A bank run is unrestrained demand for cash by savers which places a liquidity strain on the bank causing it to collapse, because it cannot meet its obligations. Bank runs can destabilize the financial sector because depositors start withdrawing all their money from the banking system out of panic. They usually stem from unfounded rumors about a bank closure.

In the normal course of banking business, banks lend out the deposits that are entrusted to them in a process called financial intermediation. This promotes economic development given that the loans can be used to finance various activities.

Banks plan their cash flow requirements daily. This is based on the normal pattern with which customers withdraw money. However, if all the customers demand to be paid on the same day, the bank will not have all the cash to pay out. As such, it gets into a liquidity crisis, which could result in closure if not addressed in a timely manner.

The DPF therefore gives comfort to the depositor that even if there was a rumor of a bank closure, they should not panic to withdraw their money because they will be paid. This calms down the depositors and the bank is able to continue operating normally. Ultimately the financial sector remains stable.

No. It is only Contributing Institutions that are required to pay money to the DPF in form of premiums.

DPF provides protection to depositors in institutions licensed by the Bank of Uganda and SACCOs currently don’t fall in that category. SACCO’s are licensed and regulated by the Uganda Microfinance Regulatory Authority. However, there are plans to place ‘large SACCOs’ under the licensing and regulation of Bank of Uganda. Once this happens, the ‘large SACCOs will start paying premiums to the Fund and their depositors will be insured by the DPF.

Dollar accounts are protected, and the funds are exchanged to Uganda shillings at the Bank of Uganda exchange rate the day before the bank closure and the 10million limit is applied.

The joint account is considered as one account and therefore the DPF would still pay up to UGX 10 million to the individuals that own the joint account.

In case one has a joint account and a personal account within the same Contributing Institution, they would be paid twice.

If a bank is closed through the liquidation process, DPF considers the amount of money you have on your account. If the money is more than UGX 10 million, you will be paid up to UGX 10 million. However, if you have a non-performing loan, the amount is deducted before payment is made.

  1. DPF protects a large percentage of retail/small depositors. Currently, 98 percent of the depositors in the sector are fully covered by the Fund.
  2. DPF creates confidence in the financial sector by ensuring that most customers are paid their full deposits in time in the event a Contributing Institution is closed or has failed. This helps to avoid bank runs which can collapse a bank due to unrestrained demand for cash by savers.
  3. To avoid paying additional premiums, Contributing Institutions endeavor to put in place adequate risk management systems.

In ensuring financial sector stability, the DPF works closely with the Bank of Uganda (BoU). BoU has a range of options it can use to ensure that Contributing Institutions exit the sector without inconveniencing depositors. As such, Bank of Uganda would advise DPF to pay depositors out of the Fund, as the very last option. This is in line with the international best practice.

DPF works closely with various stakeholders, and these include Bank of Uganda, Ministry of Finance, Planning and Economic Development (MoFPED), World Bank, Depositors of Contributing Financial Institutions, Contributing Financial Institutions, General Public, Media, International Association of Depositor Insurers (IADI), Insurance Regulatory Authority (IRA), Capital Market Authority (CMA), Uganda Microfinance Regulatory Authority (UMRA) and Uganda Bankers Association.

Depositors of Contributing Institutions are encouraged to;

  1. Closely monitor the performance of the institutions in which they have deposited their money.
  2. Update their details with their respective financial institutions using their national ID and mobile phone numbers or alternative bank account.
  3. Bank with confidence because the DPF ensures that their deposits will be paid up to UGX 10 million, in the unlikely event of a bank closure.
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