Banks lean on digital fees as loans underperform
Lewanika Timothy | Monday October 19, 2026 11:56
The shift helped lift the banking industry’s total income in 2025, although it did not prevent annual profits from falling. Banks increasingly relied on fee payments, commissions, and currency transactions to offset pressure on their traditional business of “borrowing money” and lending it at a margin.
According to the latest Bank of Botswana Banking Supervision Report, the funds banks made from transactional fees and foreign exchange trading increased by 34% to P5.2 billion in 2025, accounting for 44% of total income, up from 34% a year earlier.
'The higher level of non-interest income was generated mainly from fee and commission income from increased transactional volumes on digital platforms and an increase in foreign-exchange transaction volumes and activity. “Consequently, the proportion of non-interest income to total income rose from 34.3% in the 12 months to December 2024 to 43.8% in the corresponding period in 2025,' BoB researchers said.
Net interest income measures what banks retain from interest earned after paying interest on deposits and other funding. When securing that funding becomes more expensive, lending can generate less income even if borrowers continue paying.
“In contrast, net-interest income declined by 10.4% from P7.5 billion in the 12 months to December 2024 to P6.7 billion in the corresponding period in 2025 owing to the increase in the cost of funding emanating from the shortage of liquidity in the market, which drove interest expenses high,” researchers stated.
Researchers at the central bank found that digital banking has proved a strong revenue source for banks. In 2025, the country’s point of sale (POS) network expanded to 31,772 terminals, broadening the infrastructure available for card payments and cashback services at participating retailers.
Electronic Funds Transfers processed through the Botswana Automated Clearing House increased from 12.5 million transactions in 2024 to 12.8 million in 2025, whilst their total value rose from P333.5 billion to P341.8 billion, reflecting greater use of electronic payments.
The report attributes fee growth principally to higher transaction volumes. Foreign exchange activity also increased, following the central bank's decisions to make it more expensive for commercial banks to knock on its doors for foreign exchange supply, when they can trade it amongst themselves.
“The growth in market-risk weighted assets was a result of the increase in foreign exchange transactions at some banks. In addition, one bank established a treasury department and began foreign-currency trading, thus contributing to the increased market-risk-weighted assets,” the report states.
The country’s largest commercial bank by loan book, First National Bank Botswana, recently unveiled results showing its non-interest income rising 30% to P2.31 billion, whilst net interest income before impairments declined two percent. Interest expenses increased 84%, outpacing growth in interest earned.