This archive report was first published on 2 July 2020.
On July 2, 2020, the Kenya Deposit Insurance Corporation took a crucial step to boost customer confidence by increasing the amount payable to depositors in the event of a bank collapse.
Previously, the amount was limited to Sh100,000, leaving many depositors at risk of financial hardship. With the majority of depositors holding less than Sh1 million, the increased payout will shield more Kenyans from unnecessary financial pain.
However, it is essential that the regulator and other government agencies continue to ensure that banks remain liquid and meet the necessary thresholds to remain stable. Preventing financial crises is always better than curing them.
The move is expected to have a ripple effect, encouraging high net worth individuals to keep their money in fixed deposits, creating a pool from which banks can lend to their customers. In turn, banks must comply with the rules set out by the corporation and pay their dues to ensure the system works.
Going forward, the amount payable should be reviewed every ten years, rather than the current 30-year cycle.
