Last Updated
Thursday 23 April 2015, 18:41 pm.
'Financial illiteracy spurs indebtedness'

Most households have found themselves trapped in high amounts of unsustainable debt due to lack of financial education and discipline, experts believe.
By Staff Writer Sat 25 Apr 2015, 03:50 am (GMT +2)
Mmegi Online :: 'Financial illiteracy spurs indebtedness'








According to panellists at a debt management discussion held at the University of Botswana (UB) Library Auditorium last week, high indebtedness is a 'disease' that is home grown and passed on to children by parents, a cycle that can only be broken by financial know-how.

Most commentators agreed that the public still lacks much information, while others suggested that there should be money put aside to educate the public on this matter to avoid households incurring massive debts. Emmanuel Botlhale, a senior lecturer in public finance at UB, argued that most households lack financial education, financial literacy, budget planning and financial discipline and, therefore, end up trapped in debt. "In most cases a lot of people end up being indebted because they spend more than they earn. Indebtedness is a self-inflicted wound and can only be solved through an individual's initiative and discipline. People should realise that perpetual indebtedness has serious consequences, but then again debt is ok as long as it is managed properly," he said.

While some households are highly indebted with commercial banks, others are wallowing in debts from the informal sector, including Metshelo, cash loan sharks, friends and family. According to Bank of Botswana (BoB) figures, as at April this year households owed P21 billion to commercial banks, 70 percent of which was in the form of the more expensive unsecured loans.Loan arrears attributable to individuals reached a record P931.2 million in the first quarter of the year, translating to approximately one defaulting borrower in every 20 at commercial banks.The discussion, which was attended by specialists who deal with financial planning, was under the theme, "Unshackle the bounds of debt and take the first step to financial freedom".UB psychology lecturer, Monde Mokote, stated that debt is habitual and cultural partly because parents teach their children that only females can manage their finances well when the idea should be to teach the boy-child to be frugal with his finances as well. He pointed out that the only way to help improve the mental health of clients who suffer from high debt is to put them in control of their debt. 

Mokote said the most affected are older people."They need to have a more pro-debt attitude and reduce the number of credit cards they have and avoid saying 'it is late now to get financial literacy' because it is never too late to change," he said. For his part, Monnane Monnane, of Botswana Institute for Development Policy Analysis (BIDPA), talked about one of the pillars of Vision 2016, which is prosperity. He said many people should now be looking at having "more assets than liabilities," and avoid incurring huge debts. "People should find ways of having bankable projects and use every available structure we currently have in the country like CEDA for prosperity and reduce indebtedness," he said.



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