FNBB signals SMME stress as lending slows
Lewanika Timothy | Wednesday February 25, 2026 06:00
In its latest report, the bank disclosed that there was a growing strain within Botswana’s small and medium enterprise (SME) sector, with only P84 million drawn from an approved P200 million purchase order (PO) financing facility at year-end, underscoring weakening activity for local enterprises amidst growing economic headwinds.
The bank attributed the low uptake to a slow economic activity marked by decreased government spending that had spillover effects to other microelements of the economy, such as businesses and households.
“Lending remained curtailed in the second half of the financial year owing to some significant economic headwinds, which severely impacted the government, a significant customer of SME,” the bank revealed.
The P84 million drawdown represents less than half of the facility’s intended advances, a shortfall that points to tightening liquidity conditions, higher borrowing costs, and reduced transaction flows within the SME ecosystem.
Last year, government halted the issuance of Government Purchase Orders (GPO) as part of expenditure control measures amid mounting fiscal pressures. The pause in GPO issuance disrupted cash flow pipelines for many SMEs whose business models are structured around government contracts and invoice-backed financing.
Purchase order financing typically allows SMEs to access short-term working capital against confirmed government or corporate orders. Reduced issuance of GPOs therefore directly limits the volume of finance that can be drawn, dampening business turnover across supply chains linked to public sector procurement.
The bank further noted that the increased cost of lending, reflecting tighter monetary conditions and heightened risk pricing, compounded the slowdown. Higher financing costs are expected to reduce appetite for credit, particularly in sectors operating on thin margins and dependent on delayed public sector payments.
The data reinforces a structural feature of Botswana’s economy: the deep interlinkage between government expenditure and private sector liquidity. When fiscal pressures tighten public spending, secondary effects ripple quickly through SMEs, banking activity and broader domestic demand.
With SMEs widely viewed as critical drivers of employment and diversification, the subdued drawdown signals that economic headwinds are filtering beyond headline fiscal numbers and into the operational core of the private sector.