The national Bank of Rwanda (BNR) will introduce a Deposit Insurance Fund to cushion depositors in case a bank collapses. John Rwangombwa, the central bank governor, said already a draft law has been done to that effect.Rwangombwa, however, said the initiative was still being discussed by stakeholders. He added that it was part of the reforms the central bank was making in the financial sector legal and regulatory framework.“Based on the level of banks we have today and the amount of deposits as well as the number of Rwandans linked to the financial sector, it is important that we safeguard depositors’ money,” said Rwangombwa.He was speaking during the monetary policy and financial stability committees’ quarterly press briefing early this week.“Some years ago, the government had to use tax-payers’ money to pay depositors for losses caused by the then BACAR (currently Fina Bank) and Commercial Bank of Rwanda (BCR),” he said while explaining the need for the fund.Rwangombwa noted that if there was a deposit insurance fund, it would have been easy to pay depositors. He said once the fund is instituted, it will be mandatory for commercial banks and other deposit-taking finance institutions to make regular contributions to the fund. The money would be used by the sector regulator to settle depositors’ claims in case a bank collapsed.“Deposit insurance is a big component of a safety net of a financial system and promotes stability in a financial sector. It also makes it resilient to external shocks,” Rwangombwa explained.In countries like Kenya, where the fund is already in place, deposit insurance or depository insurance, covers only a fixed maximum amount of money per account holder.The insurance industry in Rwanda continues to improve progressively. The industry’s assets were Rwf203.9b in March compared to Rwf169.2b during the same period last year.
