Management Magazine
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New measures to cushion depositors

Kenyan depositors assured a brighter future as KDIC plans to rollout  measures to minimize bank collapse.

By Caroline Mwendwa

The Kenya Deposit Insurance Corporation will soon roll out a raft of measures as part of the Corporation’s strategic future endeavours to further cushion depositors against losing their hard-earned savings by minimising bank collapse.  Among the measures to be introduced is the risk-based premium assessment model that will see financial institutions licensed by Central Bank of Kenya priced according to their risk.

New Measures to Cushion Depositors

While assuring the Kenyan depositor of a brighter future, KDIC’s Chief Executive Officer Mohamud Ahmed Mohamud revealed that the risk-based model will help to streamline the sector. In an interview with the Management, Mohamud emphasised that KDIC will continue to collaborate and complement the role of CBK which is the prudential supervisor in the country. “We will be pricing banks in accordance to their risk; the higher the risk, the higher the premium paid. This will enhance market discipline and foster stability,” said Mohamud. He added that: “The Corporation is working with CBK to enhance risk surveillance. We continue to encourage partnerships with members in their dealings. We facilitate their journey and help them avoid pitfalls by developing tools that facilitate early warning signs, flagging them and advising in time before any problems.”

The Corporation which was initially a unit under CBK, gained its autonomy in 2012 following the operationalisation of the KDI Act, and has since become a yard stick of excellence in matters deposit insurance not just in Kenya but also globally.

Mohamud, an astute and accomplished industry leader with 24 years of experience, told the Management that KDIC was keen on investing in public awareness with a view to educating the masses on why they no longer need to worry about their bank investment. “We are aware that some people may still be hesitant to save their earnings in financial institutions, perhaps due to losses that have happened in the past. However with the new KDIC measures, be sure that your money in any bank or Micro-finance bank that is licensed by CBK is secure and insured,” Mohamud assured.

At the same time, Mohamud insisted that poor corporate governance and undefined business plans were among the reasons that have previously led to the collapse of some financial institutions globally, adding that industry leaders must always remember that they hold the money in trust. “Our main goal right now is to ensure that there is no bank that fails and closes in future. It is paramount that people tasked with managing deposit taking institutions must be cognizant of the fact that they are handling public funds being deposits,” the CEO asserted while appreciating the strides made in the sector.

So far KDIC has conclusively resolved 9 institutions and is currently handling 2 others in receivership as well as 17 institutions in liquidation.  

“For a successful resolution and strong financial sector, close cooperation and coordination of CBK, KDIC, National Treasury and member institutions is critical and ought to be harnessed,” said Mohamud.

Considering that Financial Techs (FINTECHS) have gained prominence in money transactions, Mohamud revealed that KDIC was committed to cover those using such platforms, and even encourages their development. “Digital Products are covered, under their category,” he observed. His commitment to ensure that Fintechs are not left out in this critical mission of deposit insurance, has seen International Association of Depositors Insurers form a Fintech committee, and Mohamud appointed the chairman.

KDIC is known to set standards on deposit insurance not just in the region but globally. In 2016, the Corporation was feted as the ‘Deposit Insurance Organisation’ of the year, a global award that attests to the fact that its laws are fully aligned with the International Best Practice.

Mohamud’s expertise in deposit insurance is recognised the world over as he sits in the executive committee of International Association of Deposit Insurers where he influences decisions. He is an assessor and is constantly assessing jurisdictions in various countries advising them on application and compliance with best practice. No wonder KDIC’s law remains to be the best so far compared to many countries.

Collaborations and partnerships

There has been a gap in terms of personnel, skilled in deposit insurance. As such, Mohamud says   KDIC has since challenged institutions to explore ways in which interested students can be offered courses in deposit insurance.  If implemented, that will be the new frontier in the global job market.  He however says that KDIC is collaborating with institutions of higher learning to offer such courses.

Words of wisdom

Mohamud’s leadership attributes that have driven him to success are honesty and integrity. His advice to fellow leaders is that how our country turns out depends on the little things they do. “Fear the creator, love your country as you love yourself for the creator to bless our land,” he concludes.

Caroline Mwendwa is the Editor Management Magazine

cmwendwa@kim.ac.ke

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