The Central Bank Governor, François Kanimba, has said that a feasibility study will commence this year, paving way for the introduction of mandatory deposit insurance scheme.
The Governor said that the deposit insurance fund would cover for depositors’ money in case the bank or any deposit-taking financial institution goes bankrupt.
“Government has decided to establish an insurance deposit though there have been no major cases of insolvency apart from the closed MFIs,” Kanimba said.
The move comes barely two years after Rwanda saw the collapse of some Microfinance Institutions (MFIs).
According to the Governor, government also injected some money during the restructuring of the Commercial Bank of Rwanda (BCR) and former BACAR now FINA Bank.
Available legislation suggest that, “government is not obliged to compensate depositors in case of bankruptcy of deposit-taking financial institutions but it can intervene depending on the importance and the crevice created.”
However, the establishment of the mandatory insurance deposit is provided for in the Banking and MFI’s laws.
Kanimba could not divulge details of how the highly controversial deposit insurance fund will stabilize Rwanda’s financial sector, saying it’s too early to determine the impact.
“Deposit insurance has a controversial debate worldwide, it has been criticised as encouraging mismanagement in the expectation that they will be bailed out,” Kanimba said.
In a move to improve the culture of saving, the government is interested in improving measures to provide an enabling environment to increase on the banking population and attract more investors in the sector.