59% of closed Mercantile clients held below Shs1m 

The Deposit Protection Fund has already announced a plan to pay depositors on Mercantile Credit Bank, which Bank of Uganda closed last week. Photo / File 

What you need to know:

  • Out of the 2,850 accounts, 1,692 or 59 percent, as of June 24, held a combined sum of Shs189m, with each depositor holding at least Shs1m or below 

At least 59 percent of customers in now closed Mercantile Credit Bank held deposits of between Shs1m and below, according to details from the Deposit Protection Fund.

In details released yesterday, the Deposit Protection Fund noted that out of the 2,850 accounts, 1,692 or 59 percent, as of June 24, held a combined sum of Shs189m, with each depositor holding at least Shs1m or below. 

Details further indicate that 288 depositors or 10 percent held between Shs1m and Shs10m, with a combined Shs1.46b, while 870 or 31 percent held above Shs10m, or a combined sum of Shs1.3b.

Mercantile Credit Bank, which was closed last week over undercapitalisation and governance-challenges, as of June 24, held Shs3.03b in deposits shared between 1,896 individual accounts, 370 company accounts, 191 joint accounts and 229 trust accounts, of which at least 94 percent will be paid under the Deposit Protection Fund provision that ensures that customers with deposits of less Shs10m or less are paid. 

Details further indicate that the 6 percent, who hold above Shs10m are expected to be paid after the liquidation process. 

While addressing a press briefing in Kampala yesterday, Dr Julia Clare Olima Oyet, the Deposit Protection Fund chief executive officer, said it had commenced payment of individual depositors with balances of Shs1m and below through mobile money, while payment of depositors holding between Shs1m and Shs10m would begin on July 1.

However, she noted, payments will only be made to depositors whose bank accounts match their national IDs.  

On June 18, Bank of Uganda placed Mercantile Credit Bank under liquidation and revoked its license, before issuing an order in which the credit or tier II institution will be required to wind up of its affairs with effect from June 18. 

Mercantile Credit Bank was the second financial institution to be closed in less than six months after Bank of Uganda in January closed EFC Uganda over undercapitalisation and governance-related issues. 

Tier II financial institutions are required to have increased their paid-up capital to Shs25b by the end of this month from Shs1b, while that of commercial banks has to increase to Shs150b. 

However, the increase has presented challenges, leading to the closure of some financial institutions, while others have had to downgrade their operations.  

Opportunity Bank, Guaranty Trust Bank and ABC Capital early this year applied to downgrade their licences from commercial banks to credit institutions. 

Details also indicated that many financial institutions have had to take huge loans or capital boosts from parent companies to meet the new requirement.  

The Deposit Protection Fund acts as an insurance for depositors holding between Shs10m and below, with a mandate to pay depositors in the event that a financial institution is closed. 

Dr Olima also noted that customers with company, joint, and trust accounts will be paid effective July 08 after verifying depositors’ documents such as a letter confirming the account name, and signatures of the signatories, a registered board resolution indicating the bank account to which the deposit should be paid, certificate of incorporation, location of the company, memorandum and articles of association and copies of valid original IDs of signatories.