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If you have listened to, seen or heard most adverts by banks these days, you must have heard at the end, a sign-off that, “deposits are protected by the Deposit Protection Fund of Uganda”.
In case you didn’t already know, the Deposit Protection Fund of Uganda (DPF) is a government agency that provides deposit insurance to customers of deposit-taking institutions licensed by the Bank of Uganda. It was established as a separate entity by the Financial Institutions (Amended) Act, 2016, to ensure that in the unlikely event of failure/closure of a contributing institution, all depositors with UGX10 million and below are paid their entire deposits.
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. In the unlikely event of closure, 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.
Those who have more than the UGX 10 million will be paid the excess from the liquidation proceeds. The Protection limit was reviewed from UGX 3m to UGX 10m in Sept. 2019
The contributing institutions, membership is compulsory for all BOU-supervised deposit-taking institutions ⏤ commercial banks, credit institutions and micro-finance deposit-taking institutions, pay annual premiums, amounting to at least 0.2% of the average deposits liabilities held the previous financial year.
Currently, there are 33 members⏤ 25 commercial banks, 4 credit institutions and 4 MDIs.
The money received from contributing institutions is deposited in an account held at the Bank of Uganda. It is then invested in assets with minimal risks such as Government of Uganda treasury bills and bonds. The income from the investment is reinvested.
As of December 2022, 98 % of deposit accounts were fully protected⏤20.9 million accounts out of 21.3 million accounts as of Sept 2022. The total value of protected deposits constitutes 19 % of all total deposits in the sector i.e. UGX6.5 trillion out of UGX34 trillion.
The process of operationalising the Fund commenced in April 2017 with the inauguration of the Board of Directors by the Minister of Finance, Planning and Economic Development.
Following the inauguration of the board, it proceeded to appoint Mrs Julia Clare Olima Oyet, as the first Chief Executive Officer of DPF.
Julia has over 20 years of experience in Central Banking. She is a seasoned bank supervisor and has worked in the Internal Audit and Accounts Departments of the Bank of Uganda.
Mrs. Oyet is currently pursuing a PhD in Business Administration at Herriot Watt University (UK) in the field of financial inclusion. She has a Master’s Degree in Business Administration with a Distinction, from the same institution. She is a Fellow of the Association of Chartered Certified Accountants (ACCA) and holds a Bachelor’s Degree in Business Administration and Management with a specialisation in Accounting and Finance from Uganda Martyr’s University, Nkozi.
She also serves as Secretary to the African Regional Committee (ARC) of the International Association of Deposit Insurers (IADI).
DPF comes of age
Together with the board and management, Julia led the formation and implementation of the Fund’s first strategic plan (2017-2022).
Over the last 5 years, she has overseen robust growth of the Fund’s asset base- from UGX564 billion in June 2018 to UGX 1,150 billion at the end of June 2022.
More than 98 per cent of the assets are held in Government of Uganda treasury instruments.
In the 12 months to June 2022 alone, DPF assists grew by UGX150 billion (15%), from UGX1,000 billion in June 2021. This was on the back of increased investments in Government of Uganda treasury instruments from UGX 989 billion to UGX 1,128 billion.
Total liabilities increased slightly by 12 per cent from UGX 48 billion in June 2021 to UGX 54 billion in June 2022, mainly due to an increase in deferred income resulting from increased premium collections. The Fund’s reserves increased from UGX 952 billion to UGX 1,096 billion over the period under review, driven by growth in total comprehensive income worth UGX 144 billion.
The Fund’s expenditure stood at UGX 6 billion compared to UGX 20 billion last financial year, following a write-back of a doubtful debt worth UGX 11 billion, following a tax recovery made from the Uganda Revenue Authority. Additionally, fund management fees were reduced by UGX 560 million as the Fund continues to implement its strategy of managing all investments in-house. Overall, the total cost-to-interest income ratio stood at 10 per cent, much below the 25 per cent cap approved by the Board.
Under her leadership, DPF has also come of age, moved from reliance on mainly the Central Bank for some of its key functions such as procurement and recruitment and now manages nearly all critical functions in-house, including funds management that was previously wholly managed by external fund managers. In 2022 DPF started managing 50 per cent of the investment portfolio in-house, saving the Fund some UGX560 million in fund management fees.
The Fund has also been able to conclude the filling of all positions, growing the Fund from an initial 11 staff seconded from the Central Bank, to now a fully-fledged team of 47 staff. Following the successful execution of the first 5-year strategy, the Fund has now drawn a new strategic plan that will steer the Fund up to 2027. Key, under this strategy, is doubling the size of the Fund to UGX2 trillion by 2027 as well as attaining payout readiness of between 7 to 30 days.