The National Bank of Ethiopia (NBE) has taken a significant step towards enhancing the stability of the country’s financial system by setting up a deposit insurance fund. The Ethiopian Deposit Insurance Fund has been established in line with Council of Ministers Regulation №482/2021, and it will serve as a financial safety net for depositors of commercial banks and microfinance institutions.

Deposit insurance is a form of banking regulation that protects depositors and ensures the stability of the banking system. It is a crucial component of the financial safety net because it provides explicit depositor protection and prevents a “bank run.” The NBE recognizes the importance of deposit insurance, and as such, it has established the Ethiopian Deposit Insurance Fund.

According to the NBE, all groundwork for the establishment of the Fund has been completed, and the Prime Minister Abiy Ahmed has appointed a new CEO for the deposit insurer. The incoming Chief Executive Officer of the Fund is Merga Wakweya, who currently serves as the Director of Microfinance Institutions Supervision at the National Bank of Ethiopia.

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The NBE expects the Fund to play a crucial role in maintaining depositor confidence, preserving financial stability, promoting economic growth, and developing the country. The Ethiopian Deposit Insurance Fund will compensate insured depositors of both commercial banks and microfinance institutions. The Fund will undertake various activities to achieve its objectives, including issuing directives, collecting premiums from financial institutions, and investing and managing resources.

The primary duty of the Fund is to make payments to insured depositors in the event of a bank or microfinance institution failing. This will help to maintain the confidence of depositors and ensure that they do not lose their savings in the event of a bank failure.

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In conclusion, the establishment of the Ethiopian Deposit Insurance Fund is a significant step towards enhancing the stability of Ethiopia’s financial system. It provides a safety net for depositors, promotes financial stability, and supports economic growth in the country. With Merga Wakweya at the helm, the Fund is expected to play a crucial role in achieving these objectives.

deposit insurance fund Ethiopia

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. 
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard