Ethiopia's deposit guarantee scheme has deployed the 2.8 billion birr collected from participating banks and microfinance institutions into short-term government securities.
The Ethiopian Deposit Insurance Fund (EDIF) funnelled the underwriting cash it accumulated from premium contributions, which is believed to have been invested in Treasury bills. As Treasury bills are currently the only available short-term government security in Ethiopia, EDIF is assumed to have utilized this option.
The Fund, which was established last year to protect bank depositors, has collected 2.8 billion birr in premium contributions from commercial banks and microfinance institutions in the second quarter of the Ethiopian fiscal year 2023/24. In the first quarter, it collected 1.6 billion birr, bringing the total to 4.4 billion birr for the first half of the budget year.
The collection marks progress in operationalizing the newly established deposit insurance system and will help build up the EDIF's reserves to effectively fulfill its objective of protecting small savers in case of future bank failures.
The EDIF was set up as per a Council of Ministers regulation approved in 2021 and is mandated to insure deposits of up to 100,000 birr per depositor at member financial institutions. It aims to contribute to financial stability in Ethiopia by enabling timely payments to depositors of banks that fail.
The EDIF is accountable to the National Bank of Ethiopia. Its establishment aims to strengthen Ethiopia's financial safety nets and boost stability of the financial system overall.