Batswana Owe Banks P45.9 Billion


Credit to households continues to dominate total commercial bank credit, standing at P45.9 billion in March 2022. This was concentrated in unsecured lending at 72.5 percent.
According to The Financial Stability Report (FSR) of June 2022 prepared by BoB in collaboration with the Ministry of Finance and Economic Development (MFED), the Non-Bank Financial Institutions Regulatory Authority (NBFIRA), the Financial Intelligence Agency (FIA) and the Botswana Stock Exchange Limited (BSEL) household credit grew by 6 percent in the twelve months to March 2022, lower than the 6.3 percent growth recorded in the year to March 2021.

“The proportion of unsecured loans to total credit remains higher than the 24.4 percent and 30.8 percent for South Africa and Namibia, respectively,” reads the report. “The significant share of unsecured loans and advances has the potential to cause household financial distress, given the inherently expensive nature of such credit. Therefore, households are vulnerable to sudden and sharp tightening of financial conditions.”

Household debt as a proportion of household income is estimated at 45 percent in the fourth quarter of 2021, a decrease from the 58.6 percent in the same period in 2020. “This trend implies increasing borrowing capacity and ability to repay, which remains relatively strong when compared to the 77.4 percent and 75 percent for Namibia and South Africa, respectively,” shows the report. “The ratio of household NPLs to total household credit was 3.2 percent in March 2022, a decrease from 3.5 percent in March 2021 and significantly better than the industry average of 4.2 percent in March 2022.”

The report shows that households are net savers when their non-discretionary contractual pension savings are included. “Although pension assets may not immediately alleviate short-term cash flow constraints or meet immediate financial needs, such assets may improve the long-term financial welfare of households and, in general, underpin wealth creation and financial security for retirees,” the FSR says.