NDIC extends deposit insurance to PMIs, MFBs


December 04, 2007/Punch


The Nigerian Deposit Insurance Corporation will, from January 2008, extend insurance coverage to customers of primary mortgage institutions and microfinance banks in the country.


The Managing Director, NDIC, Alhaji Ganiyu Ogunleye, disclosed this on Monday at the 6th Annual Workshop for Finance Correspondents and Business Editors, which opened in Calabar.


Deposit insurance, which has been available to customers of universal banks, has not been available to customers of PMIs and MFIs as a result of legal constraints, which Ogunleye said had been removed.


In preparation for amendment of the law establishing the NDIC to accommodate PMIs and MFIs, the corporation had in 2004, established the Special Insured Institutions Department to supervise the extension of insurance to customers of the organisations.


Ogunleye said the extension of deposit insurance coverage to MFIs and PMIs would strengthen the financial safety net in Nigeria and promote financial stability in the system.


According to him, it will also boost confidence in MFBs and PMIs and enhance their ability to mobilise savings for investments and extension of credit.


He said MFBs and PMIs had a major role to play in savings mobilisation for economic development given their large number and geographical locations.


The NDIC boss said, “They have the potential for facilitating economic inclusion of the un-banked populace by making financial services accessible to all segments of the society.


“Given that depositors of MBIs and PMIs are not as sophisticated as those of universal banks, they require protection as well as education. By way of protection, a deposit insurance coverage of N100, 000 per depositor is being extended to them by NDIC.


“Our survey indicates that this coverage limit covers a large proportion of depositors of MFBs and PMIs.


“In terms of education, the corporation is poised to intensify its public awareness campaign.”


Ogunleye noted that well informed depositors would be less susceptible to destructive rumours and financial panic.


The NDIC boss said there was need for all stakeholders to ensure that the nation did not experience the sort of crisis ignited by the recent loss of customers confidence in Northern Rock debacle in Britain .


Calling for the moderation of media reports on the financial industry, Ogunleye stressed the need to appreciate the consequences of loss of market confidence, which include bank runs, potential liquidity crisis, financial panic and bank failure.


To guard against the enactment of the Northern Rock fiasco , the NDIC boss said Nigerians should not hesitate to alert the regulatory agencies and the law enforcement agencies anytime they notice illegal banking activities.


He stated, “The recent case of Wealth Creation Limited, whose illegal banking activities had already spread to three states (Kwara, Oyo and Niger) underscored the need for media practitioners to partner with both the regulatory authorities and law enforcement agencies to curb illegal banking activities.”


According to him, illegal banking activities will ultimately lead to erosion of confidence and undermine deposit protection and financial stability.

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