Deposit Guarantee Fund Back in Khartoum: Dawn of a New Era for Sudanese Banking?

Dr Marwa Fouad Qabbani
The resumption of operations by the Bank Deposit Guarantee Fund from its headquarters in Khartoum represents a development whose significance goes beyond the reopening of a government institution after the war. It reflects the Central Bank of Sudan’s transition to a more advanced stage in implementing its banking sector reform programme and restoring the institutions responsible for financial stability.
In modern banking systems, financial sector stability is not measured solely by the number of banks or the size of their assets, but by the strength of what is known as the Financial Safety Net. This includes the central bank, banking supervision, the lender-of-last-resort function, the deposit guarantee fund, and mechanisms for resolving distressed banks.
The more integrated this framework becomes, the greater the State’s capacity to contain crises and protect the economy from financial collapse.
From this perspective, the return of the Fund represents the restoration of one of the most important components of the institutional infrastructure Sudan requires during the period of economic recovery and reconstruction, particularly after the banking sector suffered significant wartime losses, including the destruction of bank branches, disruption of operational systems, declining deposits and increased reliance on cash transactions outside the formal banking system.
From Compensation to Crisis Prevention
Statements accompanying the resumption of the Fund’s operations revealed a strategic shift in its institutional philosophy: from merely an institution responsible for compensating depositors after a bank’s failure to one that participates in preventing banking crises before they occur.
The proposed amendments to the Deposit Guarantee Fund Act of 2026 would grant the Fund broader powers to exchange information with regulatory authorities and participate in recovery plans and the resolution of distressed banks.
This approach is consistent with the international principles established by the International Association of Deposit Insurers (IADI) and the experiences of countries that have developed early-warning systems and financial crisis management frameworks.
This transformation represents a significant qualitative shift, because the cost of preventing a crisis remains far lower than the cost of addressing its consequences after it occurs.
Comprehensive Banking Reform, Not Merely Resuming Operations
The messages conveyed by the Governor of the Central Bank of Sudan confirm that the Bank does not view the reopening of institutions as marking the end of the wartime period, but rather as the beginning of a long-term process of structural reform.
The reform programme being pursued by the Central Bank appears to rest on several parallel pillars:
Rehabilitating the infrastructure of banks and financial institutions.
Increasing banks’ capital levels in proportion to emerging risks.
Encouraging mergers among smaller banks to create financial institutions with greater competitiveness and resilience to shocks.
Strengthening governance, risk management and internal controls.
Modernising the legislative and regulatory framework in accordance with international standards.
Completing the digital transformation of the payments system and banking services.
Taken together, these measures constitute a programme for restructuring the banking sector, rather than simply restoring its operations.
Trust: The Real Capital of Banking
The banking industry depends on an asset that may be even more important than financial capital: trust.
Depositors do not place their money in banks merely because they need somewhere to keep it. They do so because they trust the bank’s ability to return their funds when requested.
When that trust declines, deposits fall, banks’ capacity to provide financing weakens, cash hoarding expands, and reliance on currency circulating outside the banking system increases.
A strong and effective deposit guarantee fund is therefore one of the most important economic instruments for restoring confidence.
It reduces depositors’ concerns, strengthens funding stability and lowers the risk of bank runs.
A Direct Relationship with Digital Transformation
The Deposit Guarantee Fund may appear to be separate from the issue of digital transformation, but in reality, the two are closely related.
The success of electronic payment applications, digital wallets, the national payment switch, point-of-sale systems and mobile banking services fundamentally depends on customers’ confidence in the banking system.
It is impossible to build a digital economy based on bank accounts if citizens do not feel confident that their money is safe inside banks.
Deposit protection therefore becomes part of the infrastructure of digital transformation, rather than merely a mechanism for compensating losses.
Supporting Reconstruction
During the reconstruction phase, Sudan will need to mobilise substantial financial resources to finance infrastructure, productive sectors and public services.
Banks cannot perform this role without a strong deposit base.
Strengthening confidence in the banking system would therefore encourage a significant proportion of liquidity currently circulating outside the formal financial system to return to banks.
This, in turn, would increase banks’ capacity to finance investment and production while reducing pressure on government financing.
A Message to Markets and International Institutions
The Fund’s return also sends an important message to regional and international financial institutions: Sudan has begun rebuilding its financial institutions according to modern standards.
Reform is no longer confined to operational matters. It also includes modernising legislation, strengthening governance and developing risk-management instruments.
This message is particularly important as Sudan seeks to restore its international banking relationships, expand its network of correspondent banks, and attract foreign financing and investment.
The Challenges Ahead
Despite the importance of this step, its success will remain dependent on completing the broader reform process, particularly:
Enacting the Deposit Guarantee Fund Act in its proposed new form.
Strengthening the Fund’s independence and institutional capacity.
Completing the recapitalisation of banks in accordance with the new requirements.
Encouraging bank mergers to create stronger financial institutions.
Accelerating completion of the national payment switch project and expanding the participation of licensed financial technology companies in operating private financial switches connected to the national switch, thereby promoting competition and innovation and improving the efficiency of payment services.
Expanding the use of digital banking services, point-of-sale systems and agent banking to reduce dependence on cash.
Rebuilding correspondent banking relationships and gradually reconnecting Sudan with the global financial system.
Conclusion
The return of the Deposit Guarantee Fund is not merely an administrative development. It is an indication that the Central Bank of Sudan has begun moving from managing the consequences of war towards building a modern banking sector capable of supporting economic recovery.
If the Central Bank succeeds in completing capital reforms, consolidating the banking sector through mergers, modernising the legislative framework, strengthening the role of the Deposit Guarantee Fund and accelerating digital transformation, Sudan will have a historic opportunity to reshape its banking sector on more efficient and resilient foundations.
The financial sector could then become a central pillar for financing reconstruction, stimulating investment and strengthening economic stability in the years ahead.
Strategic Planning and Digital Transformation Expert

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