Uganda’s Deposit Protection Fund’s total assets hit Ush1 trillion ($282.95 million) in 2021 while its total income was Ush177 billion ($50 million).

This indicated increased ability for settlement of future depositors’ claims arising from failed financial institutions as well as minimal impact from the Covid-19 pandemic against the fund.

The Deposit Protection Fund provides insurance cover for depositors’ claims arising from failed financial institutions that may include commercial banks, credit institutions and micro deposit taking institutions licensed by the Bank of Uganda. The fund’s maximum insurance cover for local depositors’ is Ush10 million ($2,829). Depositors can be compensated for any claim below this .

The latest financial results released by the Deposit Protection Fund of Uganda (DPF Uganda) show its total assets rose from Ush820 billion($232 million) in June 2020 to Ush1 trillion($282.95 million) in June 2021, while the fund’s coverage ratio for affected depositors stood at 18.6 percent compared with the recommended global minimum ratio of 10 percent.

In comparison, total deposits held by the banking sector stood at Ush13.1 trillion ($3.68 billion) by close of June 2021, and the overall number of customer bank accounts grew from 16 million in June 2020 to 19.1 million in June 2021. This was amid increased uptake of agency banking services within the local population fuelled by lower transaction fees for large financial transfers.

Whereas several financial institutions bore the brunt of struggling clients hit hard by Covid-19 lockdown measures, coupled with cases of infected customers who depleted their life savings in medical bills attributed to the coronavirus, the Deposit Protection Fund registered little impact from the pandemic over the past two years.

“Bank of Uganda put in place several contingency measures to protect financial institutions from the adverse effects of the Covid-19 pandemic and this has led to absence of bank failure cases to date. Commercial banks contribute small amounts to the fund every year and none of them has defaulted since the Covid-19 pandemic was reported in Uganda,” said Julia Clare Oyet, DPF’s chief executive.

The fund recorded a 17 percent return on assets during the financial year 2020/21, an outcome that was driven by returns from investments in Uganda government Treasury bonds that registered yields of 14-15 percent during the period under review.

The DPF’s investment costs were estimated at two percent of its investment income or Ush2 billion ($565,898). But a decision to slash investment costs by 50 percent in the current financial year is likely to unsettle local fund managers contracted by the DPF.

“The performance of the DPF depends on the competitiveness of the government debt market. Whenever offshore investors feel it is time to cash in on their local assets, it becomes easier for the fund to accumulate new treasury bond holdings because there is increased supply of debt paper in the market during such periods,” said Mubbale-Kabandamawa Mugalya, Investment Manager at Sanlam Investments Uganda Limited, a firm that manages Ush200 billion($56.5 million) in assets on behalf of the deposit protection fund.