Tanzania has raised the insured deposit limit for bank savers to Tsh7.5 million ($3,027.54) to protect more depositors from bank failures and boost confidence in the banking sector, as the government extends coverage to beneficiaries of trust accounts.

Latest disclosures by the Bank of Tanzania (BoT) show Tanzania’s Deposit Insurance Board (DIB) has adjusted upwards the amount of insured deposits to Tsh7.5 million ($3,027.54) from Tsh1.5 million ($605.5), joining its Kenyan counterpart—Kenya Deposit Insurance Corporation—which is seeking to raise its own threshold from Ksh500,000 ($3,875.96) for the second time in four years.

Tanzania’s increased depositor compensation limit has seen the ratio of fully insured deposit accounts to the total number of insurable deposit accounts rise to 99.1 percent from 97.3 percent, which compares favourably with the International Association of Deposit Insurers (IADI) standard threshold of at least 90 percent.

Further, the value of insured deposits to total insurable deposits was 18.1 percent which was above the East Africa Community (EAC) target of 10 percent.

Initially, DIB compensated victims of failed banks by an amount up to Tsh1.5 million ($605.5) per depositor in accordance with the limit provided under the Banking and Financial Institutions Act 2006.“The Deposit Insurance Fund (DIF) remained capable of meeting deposit insurance obligations, contributing to safety, soundness and public confidence in the banking sector. The maximum coverage amount is Tsh7.5 million ($3,027.54) and ratio of fully insured deposit accounts to the total number of insurable deposit accounts rose from 97.3 percent to 99.1 percent,” BoT says through its annual financial inclusion report (2024).“Coverage is above the International Association of Deposit Insurers (IADI) standard threshold of at least 90 percent. Generally, the DIF is performing well against IADI’s minimum recommended ratio of 90 percent in terms of Fully Covered Accounts to Total Number of Insurable Accounts.”According to the report, the Tanzanian government is also broadening depositor protection granted by the DIB to include ultimate beneficiaries of trust accounts.

A Trust account is a pooled (comingled) account which holds funds on behalf of more than one depositor provided that such funds shall be placed with an institution licensed by the BoT.“The DIB reimburses depositors their insured deposits in the event of failure of a bank or financial institution. Currently insured deposits are covered to the tune of Tsh7,500,000 per depositor per bank,” says DIB on its website.“The primary objective of deposit protection is to cover small depositors. The limit was set based on analysis which revealed that 90 percent of all deposit accounts are fully covered at that limit. However, the limit is subject to revision to align with the size of the Fund and economic conditions.”

On the other hand, the amount of savings in the banks increased by 10.3 percent to Tsh7.71 trillion ($3.11 billion) in 2024 from Tsh6.99 trillion ($2.82 billion) in 2023.

The Deposit Guarantee Scheme in Tanzania was established under the Banking and Financial Institutions Act of 2006 and is managed by the DIB comprising the DIF.

Whenever a bank or financial institution is closed due to insolvency or non-compliance, and liquidation is chosen as a resolution option, the DIB shall pay the insured deposits of that bank or institution.

DIB, which is responsible for policy formulation, management, and control of the Deposit Insurance Fund (DIF), started operations in 1994 as a pay box with an extended mandate.

Currently, DIB is liquidating a total of nine (9) banks which were closed by the BoT at various times.

The failed banks under liquidation and their respective years of closure are Greenland Bank Tanzania Limited (2000), Delphis Bank Tanzania Ltd (2003), FBME Bank Ltd (2017), Mbinga Community Bank Plc (2017) and Njombe Community Bank Ltd (2018)Others are Meru Community Bank Ltd (2018), Covenant Bank for Women (T) Ltd (2018), Kagera Farmers’ Cooperative Bank Ltd (2018) and Efatha Bank Ltd (2018).

The liquidation exercise of Greenland Bank (T) Limited and Delphis Bank (T) Ltd is in the final stages while liquidation of the remaining seven closed banks is ongoing, according to DIB.

Currently, there are 42 member banks and financial institutions whose deposits are insured by the DIB as stipulated in the Banking and Financial Institutions Act, 2006.

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