As an integral component of an effective financial safety net, a Deposit Protection Scheme enhances consumer protection by providing explicit protection to depositors.
It is a scheme established by the government to protect depositors against the loss of their insured deposits placed with member institutions licensed to operate banking or finance business.
Depositors will know when, how much and how their deposits are protected in the event of a bank or insurance failure.
The scheme contributes to financial stability and prevents bank runs if depositors have confidence that they will have access to their funds when a bank fails.
On Tuesday, the Minister of Communications Science and Technology Keketso Sello revealed that Cabinet has approved the introduction of the said policy.
The Minister told Metro on Wednesday that the Central Bank of Lesotho (CBL) has already passed the same directive to stakeholders that include commercial banks as well as insurance entities in the country.
“The CBL has actually given a directive to stakeholders to prepare for the introduction of the Deposit Protection Scheme in a move to protect depositors in cases of liquidation,” Mr Sello said.
He added that players will be expected to deposit funds into the scheme depending on the number of clients each institution serves.
“The more clients you have, the more you pay. Our deposits should be in safe hands and maybe in future as the scheme develops, it will reach to a point where other measures of making more money will be implemented, thus apart from member institutions having to deposit funds,” Mr Sello further showed.