Since its inception in 2020, the Namibia Deposit Guarantee Authority (NDGA) has grown in value to the point where it can cover payments to 1,3 million small depositors, for a total amount of N$25,000 each, in the case of a financial institution going bankrupt.
Using that formula, the NDGA says it is satisfied that it would cover 90% of depositors.
The organization's head, Florette Nakusera, announced this at the launch of the NDGA's annual report and strategic plan in Windhoek.
Nakusera says the fund's growth is a sign that the banking industry is resilient, with elevated growth in earnings within the sector.
"Partially, we can cover 135 thousand people. Now that partial recovery means there are some that got more than N$25,000, so we will cover if you have 50, we cover N$25,000 because the aim is to protect small depositors. There are deposits that are eligible and some that are excluded as per the act, and therefore it is important to know when you are putting your money in the different accounts which ones are eligible should a banking institution fail and which ones I am protected against up to the limit of $25,000 by the NDGA."
Eligible deposits include credit balances on current accounts, transmission accounts, call accounts, savings accounts, notice deposits, term deposits, and credit cards.
Established in February 2020 under the Namibia Deposit Guarantee Act, the NDGA is a scheme that aims to protect small depositors from losing their savings by compensating them in the unlikely event of a commercial bank failure.
The value of the authority has improved over the past three years.
"When we look at the portfolio income and the market value as of December 31, we had N$10.3 million, and then we saw how interest income increased in the quarters with premium contributions at N$5.2 million while the total interest income we earned was about N$790,000, and that brought us to a total of N$16.2 million."
However, clients of banking institutions that failed before the NDGA was established are not eligible for compensation, including, for instance, the SME Bank, which closed down in 2017.
"The SME bank experience is still fresh in our minds and one we hope will go away soon. Even though Namibian banks are well-run, well-capitalized, and profitable, it will not be very wise for us to be well assured in the level of confidence that may prevail that Namibian banks will not fail one day, and it is from this reality that BON established the authority to anticipate these eventualities and provide a level of comfort to depositors and the banks as well," explained Brian Katjerua, CEO of the Bankers Association of Namibia.
NDGA currently has seven local banking institutions as members, as well as one foreign bank operating in Namibia.