The Nigeria Deposit Insurance Corporation (NDIC) has extended deposit insurance coverage of N500,000 and N200,000 to depositors of non-interest banks and financial institutions.
The NDIC, in a release yesterday, said the move became necessary following the successful take off of the non-interest banking in Nigeria that is currently being undertaken by Jaiz Bank, Stanbic IBTC and Sterling Banks.
The Corporation noted that prior to now, the deposit liabilities of non-interest banks and institutions were not covered under its Deposit Insurance Scheme (DIS).
According to the NDIC, the framework for the coverage includes depositor protection against loss in the event of failure of any non-Interest bank; to engender public confidence and enhance resilience of non-interest financial institutions; encourage competitiveness of non-interest financial institutions; help to contain the cost of resolving failed non-interest banks and provide an orderly failure resolution mechanism; and also promote and contribute to the stability of Nigeria’s financial system.
The commission said “The maximum deposit insurance coverage (MDIC) for the non-interest banking Institutions would be the same as the conventional banks i.e. N500,000 and N200,000 per depositor per account in Deposit Money Banks (DMBs) and Microfinance Banks (MFBs) respectively.”
According the NDIC, the non-interest deposits covered under the scheme include safe keeping deposit (Wadi’ah); interest free deposit for investment (Qard); profit sharing/loss bearing deposit (mudarabah); profit and loss sharing deposit (musharakah); and any other deposit type that is non-interest based and approved by the central bank of Nigeria (CBN).
Also, the corporation said that the following financial products will however not be covered under the Scheme; insider deposits – Deposits of staff, including directors of non-interest banks or financial institutions; counter-claims from one person who maintains both a deposit account and a non-interest bearing loan account and or a loan based on murabahah financing where the deposit account serves as a collateral for either or both of the loan accounts and inter-bank takings.
The emergence of the non-interest banking model in the global financial landscape and its acceptance worldwide as a veritable tool for financial intermediation as well as its proven resilience during the 2007/2008 economic meltdown paved the way for the introduction of non-interest banking in Nigeria.