adminBuilding confidence in financial institutions
The DPC promotes financial inclusion by fostering confidence in financial institutions and potentially leading to greater savings among the poor provided that they are informed about safe places to store their money.
The DPC provides peace of mind and security to depositors in knowing that their deposits will be reimbursed in the event that their contributory institution becomes illiquid or insolvent.
The existence of an explicit deposit protection scheme under DPC reduces financial uncertainty, thereby building confidence in the financial system, and enhancing financial intermediation on a nationwide basis, thereby promoting financial inclusion.
Promoting competition in the financial sector
The DPC covers depositors of both small and big banks in Zimbabwe, hence contributing to financial stability and promoting competition in the financial sector.
Traditionally, larger banks because of their size, track record and brand visibility have an edge over smaller banks in attracting deposits at lower interest rates.
Deposit protection makes depositors of smaller banks feel safe and protected hence neutralise the advantages that accrue to big banks. Potential depositors may have greater trust in banks if they believe their savings are insured and this may lead to more individuals to open bank accounts.
Financial literacy and public awareness
The DPC carries out financial literacy and public awareness campaigns to raise awareness among the banked and unbanked on the benefits and limitations of deposit protection. The public must be informed about the type of deposits which are protected, the coverage limits and the safe methods of storing their money thereby promoting the use of the main stream banking. Such campaigns are conducted through a variety of media channels, including the internet, print, electronic, point of purchase, and billboards.
Compulsory coverage of financial intermediaries
Membership to deposit protection in Zimbabwe is compulsory to any registered banking institution. Any depositor who banks with an insured deposit taking institution is automatically covered, notwithstanding whether the depositor is sophisticated or not. In addition, the DPC extended coverage to deposit taking micro-finance institutions (DTMFIs). Extending protection to these institutions affords broad access to safe and affordable financial services and products to the marginalised and the unbanked public, thereby promoting financial inclusion.
Complementary financial safety nets and regulatory discipline
The DPC as part of the Multi-financial Stability Committee and the safety net in Zimbabwe complements the supervisory and regulatory framework via carrying out off-site surveillance and meetings to discuss potential risks or threats to financial stability.
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