The Namibia Deposit Guarantee Authority (NDGA)’s market value more than doubled to N$10,259,574 in 2021 up from N$4,902,924 reported in 2020.
Ebson Uanguta, the authority’s board chairperson, said the growth in the Fund value was primarily attributable to N$5,079,150 in member institution premiums paid in July 2021 and a total annual interest income of N$278,496 last year.
“The Namibia Deposit Guarantee Authority provides that assurance to depositors, that even in the event of a crisis such as bank failure, they will be compensated for their deposits in a timely and transparent manner,” he said in the company’s latest annual report.
The premiums received from member institutions were invested in line with the Investment Policy and Investment Agreement signed between the NDGA and the Bank of Namibia.
Emma Haiyambo, Head of UNGA, said the authority’s assets remained safe and secured for the year ended 31 December 2021 and the market value of the Deposit Guarantee Fund increased by 3.8 percent, year-on-year, to N$10.260 million.
NDGA became fully operational in 2020 and In line with its mandate, the NDGA maintains and manages a Deposit Guarantee Scheme, whose main objectives are (1) to protect a high percentage of depositors against the loss of their deposits by providing compensation in the event of a member institution failure, and (2) to enhance financial stability by way of insuring a portion of the total deposits held by the banking sector.
The existence of a deposit guarantee system ensures that depositors have access to all or part of their funds in the event of a member institution failure.
“It is also meant to prevent panic withdrawals by assuring depositors of the safety of their deposits even in the event of such failures, thereby reducing the likelihood and scale of a systemic crisis,” Haiyambo said.
In respect of the coverage limit, the initial threshold is set at N$25,000 per depositor.
Meanwhile, Uanguta said that this limit is high enough to ensure that 90 percent of depositors receive their deposits back in full.
However, because of a relatively small number of depositors holding large deposits, he emphasises that only about five percent of the total value of insurable deposits would be covered in full.
This will leave the larger depositors exposed and vulnerable to risk, thereby rendering the potential threat of moral hazard very small.
