Banks pay Sh5.5 billion as the six-month moratorium-ease lapse.

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After the lapse of a six-month moratorium, banks have paid Sh5.5 billion in deposit insurance to alleviate the cash constraints resulting from the consequences of the covid-19 pandemic.

Mohamud Ahmed Mohamud, the chief executive officer of the Kenya Deposit Insurance Corporation (KIDC), noted that the banks handed over the payments in December, which amplified the corporation’s fund utilized in insuring the Sh4.02 trillion customer deposits as of November.

“All the banks paid by December 31, after the six-month window extension expired,” Mr. Mohamud said.

The Sh5.5 billion premiums that lapsed in July 2020 were calculated based on an old formula; a flat rate of 0.15 percent of the total deposits per annum.

With the new arrangement adopted, the banks are required to pay premiums based on their risk profiles. Some of the factors considered when building a risk profile include liquidity positions, capital adequacy, asset quality, and governance structures.

Therefore, the risky individuals would pay a higher premium compared to the less risky individuals.

The KDIC introduced a revised deposit insurance coverage limit of Sh500,000, which was previously Sh100,000.

Nonetheless, the risk-based assessment model, intended to be rolled out in July 2020, was extended to July 2021 because rising defaults and pressure to restructure loans affected the banks.

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Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: anthony@finsolutions.co.ke Contact: +254 780216631

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