According to the KDI Act of 2012, KDIC membership is compulsory. The membership comprises all institutions licensed as deposit-taking and regulated by the Central Bank of Kenya. Commercial banks, mortgage institutions, and microfinance banks are members of KDIC.Currently, KDIC membership stands at thirty-seven (37) commercial banks, one (1) mortgage institution, and fourteen (14) microfinance banks..
The Deposit Insurance System should have readily available funds to ensure prompt reimbursement of depositors’ claims. Responsibility for paying the cost of deposit insurance is borne by banks. Funding for the deposit insurance system is provided on a “Pay-before-the-risk basis”. On this basis, banks pay annual premiums to KDIC to build a Deposit Insurance Fund which is utilized when one of them fails and protected deposits have to be re-imbursed.
The premium rate for each bank is determined annually based on the average deposit holding of the bank. The minimum premium however is KES 300,000 per year and the Maximum premium that a bank can pay is 0.4% of its average deposits for a year. Currently, KDIC uses a Risk-Based Premium Assessment model where banks pay a base rate of 0.15% plus a risk-adjusted rate, i.e. base rate + risk rate. The Risk-Based Premium Assessment system is designed to provide incentives to banks that have effective risk management systems, who then pay lower rates of premium.
The Deposit Insurance System is premised on protecting small, vulnerable and unsophisticated depositors, who hold most of the deposit accounts. This category of depositors lacks the skills and resources to monitor the performance of a bank and thus make an informed decision about which bank is prudently managed. Their decision is guided more by the products and services offered by the bank as opposed to the bank’s risk profile. Most of them earn low or no interest on their deposits held by the banks.
On the other hand, the Deposit Insurance System can cause moral hazard by increasing risk-taking behaviour by banks. Moral hazard is the incentive to take on greater risk as a result of being protected from the consequences of risk-taking. Since insured depositors face no risk of loss and have little incentive to withdraw funds, risks and embedded losses can sometimes build over time at banks funded largely by insured deposits.
Therefore, a deposit insurance system must consider both the financial stability benefits of more coverage and the possible implications for increased risk-taking in the banking system. The coverage limit must strike a balance between depositor protection and market discipline. The limit should also be reviewed from time to time to align it with the objectives of the deposit insurance system.
KDIC’s current deposit coverage limit is KES 500,000. The limit was first set as KES 100,000 in 1989 when the Deposit Protection Fund was established. This limit was revised in 2020 from KES 100,000 to KES 500,000 to address economic changes and align it with the objectives of KDIC, of promoting public confidence and contributing to financial stability. This limit covers up to 99% of all the accounts held in our banks. This protected amount is payable upon the bank being placed under liquidation.
To fulfill this mandate, the Corporation provides a Deposit Insurance Scheme for member institutions to cater for limited coverage of deposits as provided for by law. The Corporation increased the coverage limit from Ksh 100,000 to Ksh 500,000 with effect from 1st July 2020.
The following Commercial Banks and Microfinance Banks are members of the Deposit Insurance Scheme.
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COMMERCIAL BANKS |
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1 |
ABSA Bank of Kenya Ltd |
22 |
I & M Bank Limited |
2 |
Access Bank (Kenya) Public Limited Company |
23 |
Imperial Bank Limited (In Receivership) |
3 |
African Banking Corporation Limited |
24 |
KCB Bank Kenya Limited |
4 |
Bank of Africa Kenya Limited |
25 |
Kingdom Bank Limited |
5 |
Bank of Baroda (K) Limited |
26 |
Mayfair Bank Limited |
6 |
Bank of India |
27 |
Middle East Bank (K) Limited |
7 |
Citibank N.A Kenya |
28 |
M-Oriental Bank Limited |
8 |
Consolidated Bank of Kenya Limited |
29 |
National Bank of Kenya Limited |
9 |
Co-operative Bank of Kenya Limited |
30 |
NCBA Bank Kenya Plc |
10 |
Credit Bank Limited |
31 |
Paramount Bank Limited |
11 |
Development Bank of Kenya Limited |
32 |
Prime Bank Limited |
12 |
Diamond Trust Bank Kenya Limited |
33 |
SBM Bank Kenya Limited |
13 |
DIB Bank Kenya Limited |
34 |
Sidian Bank Limited |
14 |
Ecobank Kenya Limited |
35 |
Spire Bank Ltd |
15 |
Equity Bank Kenya Limited |
36 |
Stanbic Bank Kenya Limited |
16 |
Family Bank Limited |
37 |
Standard Chartered Bank Kenya Limited |
17 |
First Community Bank Limited |
38 |
UBA Kenya Bank Limited |
18 |
Guaranty Trust Bank (K) Ltd |
39 |
Victoria Commercial Bank Limited |
19 |
Guardian Bank Limited |
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20 |
Gulf African Bank Limited |
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21 |
Habib Bank A.G Zurich |
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MORTGAGE FINA NCE INSTITUTIONS |
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1 |
HFC Limited |
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MICROFINANCE BANKS |
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1 |
Caritas Microfinance Bank Limited |
8 |
Rafiki Microfinance Bank Limited |
2 |
Branch Microfinance Bank Limited |
9 |
KEY Microfinance Bank Limited |
3 |
Choice Microfinance Bank Limited |
10 |
SMEP Microfinance Bank Limited |
4 |
Daraja Microfinance Bank Limited |
11 |
Sumac Microfinance Bank Limited |
5 |
Faulu Microfinance Bank Limited |
12 |
U & I Microfinance Bank Limited |
6 |
Kenya Women Microfinance Bank Limited |
13 |
Uwezo Microfinance Bank Limited |
7 |
Maisha Microfinance Bank Ltd |
14 |
Muungano Microfinance Bank Limited |
Failed Member Institutions
NO. |
INSTITUTION |
A) |
IN LIQUIDATION |
1. |
Postbank Credit Ltd. |
2. |
Trade Bank Ltd. |
3. |
Middle Africa Finance Ltd. |
4. |
Pan-African Bank Ltd. |
5. |
Pan-African Credit & Finance Ltd. |
6. |
Thabiti Finance Co. Ltd. |
7. |
Meridien BIAO Bank Ltd. |
8. |
Kenya Finance Bank Ltd. |
9. |
Ari Bank Corporation Ltd |
10. |
Prudential Bank Ltd. |
11. |
Reliance Bank Ltd. |
12. |
Trust Bank Ltd. |
13. |
Euro Bank Ltd. |
14. |
Prudential Building Society |
15. |
Daima Bank Ltd. |
16. |
Dubai Bank Kenya Limited |
17 |
Chase Bank Kenya Limited |
18 |
Charterhouse Bank Limited |
19. |
Imperial Bank Limited |
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