Zimpapers Logo

Oliver Kazunga, Senior Business Reporter

FINANCE and Economic Development Minister, Professor Mthuli Ncube, has implored finance institutions to ensure they implement financial inclusion as it is critical in achieving inclusive economic growth. 

Financial inclusion, according to the World Bank, means that individuals and businesses have access to useful and affordable financial products and services that meet their needs — transactions, payments, savings, credit and insurance — delivered in a responsible and sustainable way.

Officially opening the Deposit Protection Corporation (DPC) office in Bulawayo last Friday evening, Prof Mthuli Ncube, said the banking sector must play a strategic role in oiling the economy and enhancing investor confidence. 

He quickly noted the importance of  the Deposit Protection Scheme, saying compensation of clients in the event of bank closure was paramount.

“Financial inclusion does not only involve one accessing credit or having an account but having access to basic financial information so that individuals and small businesses can make informed decisions on financial matters,” Prof Ncube. 

“In discharging their mandate, and being part of the financial safety net, I implore DPC to advance the agenda of financial inclusion as it is critical to achieving inclusive growth.”

Minister Ncube announced the increase in the deposit cover level to $10 000 from $1 000 on every depositor per each banking institution to foster a sound deposit insurance system in the country. 

“It is with great pleasure that I announce the increase in the deposit cover level from $1 000 to $10 000 per depositor per institution. Consequently, the premium rate is reviewed from 0,2 percent to 0,3 percent,” he said. 

The latest cover level, according to DPC, protects 98,9 percent of the depositors in full and at a cover level of $500 per depositor per deposit-taking micro-finance institution, 98,5 percent of the depositors will be covered in full. 

The applicable cover levels are reviewed from time to time in line with deposit protection fund’s growth and prevailing macro-economic conditions. 

In the event of failure of a contributory institution, every client with a deposit balance equal to or below the specified cover level is guaranteed to receive full compensation of the amount in his or her account at the time of closure of the contributory institution. But this is guaranteed provided that one submits a duly completed claim form. 

Any outstanding deposit balance above the specified cover level is payable through the liquidation process on a pro-rata basis. 

Prof Ncube said the opening of the DPC office in Bulawayo helps to engender confidence in the financial sector by getting closer to the people and explaining to them their role and the benefits of depositing money in formal banking institutions.

This, he said, is in accordance with the Transitional Stabilisation Programme (TSP) objectives and goals, which include, attainment of responsive public institutions. 

Prof Ncube said upon registration, all deposit-taking institutions in Zimbabwe automatically become members of the Deposit Protection Scheme, which takes away the burden of Government bailing out failed entities using taxpayers’ money. 

AfrAsia Kingdom, Genesis, Royal, and Tetrad are some of the financial institutions that closed down in recent years due to a number of factors, chief among them, lack of good corporate governance by their respective boards and management. 

Minister Ncube said the Deposit Protection Scheme has greatly enhanced public confidence in the financial system as small depositors who usually suffer the worst consequences of a bank failure are —protected. 

Speaking at the same occasion, DPC chairman Mr Agmos Moyo said his organisation would continue to work closely with its parent ministry and other financial safety net players to deliver on its mandate.

He said deposit insurance was a critical component of the financial safety net where it helps to provide depositors with clarity, reassurance and confidence and facilitates the orderly payment of claims to depositors, especially during crisis times.

“The DPC is working on amending the DPC Act to strengthen the bank resolution framework with the view to allow for speedy and finality in the resolution of failed banks,” said Mr Moyo. 

Deposit protection is free for all bank depositors and no application is required as coverage is automatic upon opening a bank account with any deposit-taking institution licenced by the Reserve Bank of Zimbabwe to operate banking or finance business in Zimbabwe. 

The DPC commenced operations in July 2003 and its primary objective is to provide deposit protection to depositors in institutions licenced to operate banking or finance business in Zimbabwe such as commercial banks, merchant banks, building societies, finance houses, discount houses and deposit-taking microfinance institutions. — @okazunga