97% of Bank Depositors Hold Less Than Birr 100,000, Deposit Insurance Fund Says

Nearly 97 percent of depositors at Ethiopia’s banks hold less than Birr 100,000, according to data obtained by the Ethiopian Deposit Insurance Fund (EDIF) from member financial institutions.

The figure provides a snapshot of the concentration of Ethiopia’s bank depositors at the lower end of the savings scale and forms part of the basis for the country’s current deposit insurance coverage limit of Birr 100,000.

According to information reported by The Ethiopian Reporter, the Deposit Insurance Fund found that the overwhelming majority of depositors across member institutions have balances below the Birr 100,000 threshold. The proportion varies among individual financial institutions, with some reporting figures of 98 percent or 99 percent.

The data does not mean that 97 percent of total deposits are below Birr 100,000. Rather, it refers to the number of depositors and their account balances, making the distinction important when assessing Ethiopia’s deposit structure.

Birr 9.35 Billion Collected in 2018 E.C.

The Ethiopian Deposit Insurance Fund collected Birr 9.35 billion in insurance premiums from member institutions during 2018 E.C., according to the report.

Private commercial banks contributed Birr 4.79 billion, while the Commercial Bank of Ethiopia contributed Birr 4.45 billion. Microfinance institutions contributed another Birr 109.3 million.

The Fund has 97 member financial institutions, comprising 31 commercial banks and 66 microfinance institutions.

Its cumulative premium collections reached Birr 23.42 billion during its first three years of operation.

Most Investments Held in Government Securities

The Fund’s investment portfolio stood at Birr 26.81 billion during 2018 E.C.

Of this amount, Birr 24.44 billion was invested in government Treasury securities, while Birr 2.36 billion was held in mudarabah term accounts.

The composition of the portfolio reflects the Fund’s role as a financial safety mechanism that needs to maintain liquidity and preserve the resources available for protecting insured depositors.

What the Birr 100,000 Limit Means

The Birr 100,000 figure is the maximum deposit insurance coverage, rather than a ceiling on deposits.

Depositors can hold amounts above Birr 100,000 in their accounts. However, in the event that a member financial institution fails and the insurance mechanism is triggered, the Fund’s protection is subject to the established coverage limit and applicable rules.

The concentration of depositors below the threshold therefore has implications for the reach of Ethiopia’s deposit insurance system. While most individual depositors fall within the coverage limit, the same does not necessarily apply to the value of deposits held across the banking system.

A Window Into Ethiopia’s Deposit Base

The data also highlights the difference between the number of depositors and the value of deposits in Ethiopia’s financial system.

A banking system can have a large majority of customers with relatively small balances while a smaller number of customers hold a substantial share of total deposits. For deposit insurance, this distinction is significant because coverage is designed primarily to protect depositors rather than guarantee the full value of every deposit.

The latest figures from the Deposit Insurance Fund therefore offer an indication of how its Birr 100,000 coverage threshold relates to the actual distribution of deposit balances among bank customers.

Source: The Ethiopian Reporter, citing information from the Ethiopian Deposit Insurance Fund.