Deposit Insurance Corporation (DIC) says it is now offering insurance coverage of up to K3 million per depositor per bank, with a coverage ratio of 92.7 percent of deposits made to the country’s commercial banks.
This is a significant jump from the K1 million the deposit insurer was offering at the time of its establishment 15 months ago and when it was covering less than 10 percent of the value of savings to safeguard against moral hazard, particularly for larger financial institutions
This was disclosed during a media sensitisation workshop with members of the Association of Business Journalists (ABJ) in Blantyre.
In an interview, DIC operations manager Lowina Mwasigala said the coverage was revised after reviewing the economic situation in the country.
She said: “Our law provides that every year this coverage limit should be revised and yes, in future we are going to revise the cover a bit higher according to the economic conditions.
“The coverage ratio is above the recommended 80 percent.”
Mwasigala said this means that in the case of a bank collapse, depositors, including those with forex currency-denominated accounts, will have a maximum of K3 million paid to them by DIC, while the balance left in their accounts will be paid after liquidation.
“But our statistics show that majority of smaller depositors may be fully covered within the insurance coverage, but we see no risks from the banks in the short to medium term,” she said.
DIC, which gets all of its funding from premium, is pondering on developing back-up funding and bringing on board deposit-taking microfinance institutions by 2027, but with a different fund for the institutions.
“So far, the coverage for the deposit taking microfinance institutions has not been determined. However, the fund for the deposit taking microfinance institutions will be different from what the banks have,” she said.
A DIC summary of financial statements for the 15-month period ended December 31 2024 published yesterday shows that the firm has a deposit insurance fund of K7.2 billion.
During the year under review, it registered an investment income of K2.3 billion and a surplus of K773.4 million.
The DIC, established by an Act passed by Parliament on March 18 2022, prioritises protection of smaller depositors, offering insurance coverage of up to K1 million (about $560).
At the time of presenting the Bill on Deposit Insurance in 2022, which sought to protect clients from losing their deposits with banks and any other financial institution in an event of financial institution failure, then Legal Affairs Committee chairperson Peter Dimba said failure of a financial institution can disrupt the discharge of responsibilities outlined in Section 10 of the Financial Services Act and would further be catastrophic to depositors, policyholders and investors who do not have resilience mechanisms.
Experts anticipate the DIC will foster financial inclusion by boosting depositor confidence and increased savings activity to contribute to a more vibrant financial system, potentially leading to greater access to credit for businesses and individuals.
Meanwhile, ABJ national coordinator Arthur Chokotho has reaffirmed the commitment of business journalists to assist DIC and other financial entities in conveying complex financial matters to the public.
In April 2022, the Reserve Bank of Malawi applied for the winding up of Alliance Capital Limited on the grounds that the company is insolvent with its net capital excessively below the minimum regulatory capital requirement of K50 million.
The firm owed various businesses, individuals and State enterprises in excess of K24.7 billion out of which K11 billion is owed to State agencies.
