EFC bank depositors with more than UGX 10m to wait longer for refunds

The Bank of Uganda has in a statement said big ticket depositors who held more than UGX 10m in deposits in the collapsed EFC Uganda bank, will have to exercise some patience as the central bank makes payment arrangements within the next two weeks.

Bank of Uganda together with the Deposit Protection Fund (DPF) are set to commence payment of depositors having balances of up to UGX 100,000 using mobile money effective January 29th, upon verification of their names and mobile phone numbers.

Depositors with balances of upto UGX 10 million will be paid effective February 5th, through an agent bank yet to be communicated.

Mr Yusuf Mukiibi, the Deposit Protection Fund DIrector of Finance and Operations said, EFC Uganda bank held a total of UGX 52 billion in deposits, of which the top 20 depositors held UGX 50 billion accounting for 98 percent, while the rest of the depositors held only UGX 2 billion accounting for 2 percent.

EFC Uganda Limited depositors’ data retrieved as at 31st of of December, 2023 indicate that those that had balances of UGX 100,000 and below constituted 1800 depositors, and depositors that had balances between UGX 100,000 and UGX 10 million stood at 600, and then depositors with bank balances above 10 million were 40.

In estimated percentages, depositors with less than UGX 100,00 constitute 68 percent of the total depositors in the bank; depositors to be paid upto UG X 10 million through the agent banking arrangements constitute 30 percent, and depositors with balances above the protected limit constitute 2 percent of the total deposit base of EFC.

Mr Mukiibi said the figures provided were estimated figures secured from the bank before its closure with the official numbers yet to be revealed by the Bank of Uganda as the official liquidator.

The Deposit Protection Fund is required to make payments of protected deposits to customers within a period of 90 days after closure of the financial institution.

The Fund provides upto a maximum of UGX 10 million in compensation for protected deposits, with the rest of the unprotected deposits covered by the Bank of Uganda.

Initially, the limit for protected deposits was UGX 3 million for 20 years before the Deposit Protection Fund came into existence, and has since been raised to UGX 10 million which covers 98 percent of all depositors in the country.

Ms Julia Clare Olima, the DPF Chief Executive Officer said that the UGX 10 million provided for is adequate following the principles of international deposit insurance that seeks to protect the small unsophiscated depositors.

“The 2 percent [in the case of EFC] above the 10 million limit are considered knowledgeable depositors who should be monitoring the financial sector, and the performance of their banks,” she said.

Ms Olima noted that deposit insurance limits cannot be raised too high because they expose the whole financial sector to moral hazards where depositors put their money in any financial institutions without a second thought on possible risks.

“Also, on the side of the financial managers, they will take a lot of risks knowing that even if the bank is closed, it is okay because the government will pay the depositors,” she said.

Ms Olima also explained the delays in paying depositors from other collapsed banks such as Greenland and Teffe.

“The depositors took some time to get their money because we were operating a highly manual system, but now we have a very sophiscated to get depositors’ details in real time and get them paid.”