High loan costs force Batswana to shelve borrowing
Timothy Lewanika | Wednesday August 5, 2026 15:29
Data from the central bank shows that as of May, household credit stands at around P55 billion, less than P57 billion recorded in May 2025.
This means that households aren’t taking up new credit or getting new loans, not because they don’t want them but because they simply can’t afford them.
Commercial banks are now holding significantly more funds than they did a year ago, a position that would ordinarily support stronger lending to households and businesses.
Instead, credit demand has weakened as higher interest rates have made monthly loan repayments increasingly unaffordable.
In his quarter two economic update, a commentary by local economist Keith Jeffries pointed to banks having more capital to loan out as compared to last year, but loans not growing due to a high interest rate environment.
“The banks now have ample funds to lend, but nevertheless credit growth has dropped to almost zero, largely due to high interest rates that make the cost of borrowing prohibitive,” researchers at Econsult revealed.
“As we have previously commented, government borrowing to finance large budget deficits is crowding out the private sector from the credit market.”
The local credit market has been a standoff between the public and private sector.
Due to its falling revenues, the government has been forced to rely on borrowing to finance short-term needs, crowding out or leaving little room for households and businesses to afford the little capital that’s left.
Researchers at Econsult found that credit uptake was growing only to parastatals, which were benefiting from government guarantees as a surety to access cheaper credit from the government.
“In fact, the growth of lending to both households and firms has turned negative, with a year-on-year contraction to April. Only lending to parastatals is increasing, where presumably the banks can earn high rates of interest on the back of government guarantees,” researchers pointed out. “The negative annual growth in lending to households is unusual, and indeed has never happened previously at any point over the past 30 years.”
The subdued credit environment follows an aggressive monetary tightening cycle by the Bank of Botswana over the past two years as authorities sought to contain inflation.
Although inflation has since eased and the central bank has begun lowering the Monetary Policy Rate, lending rates remain elevated as previous increases continue to filter through the financial system.
The result is that many prospective borrowers are postponing purchases of homes, vehicles and other big-ticket items that are typically financed through credit.