Household indebtedness saturates banks
Keikantse Lesemela | Monday May 19, 2014 16:56
Presenting an industry overview at a credit conference held last week in Gaborone, Econsult economist Bogolo Kenewendo said there is rapid growth in lending from banks and steady increase in loan deposit ratio with small banks having increasingly larger market share than the big four banks.
“Personal loans are dominating the credit industry. Household credit mortgage has also been rising over the years jumping by 40 percent in 2013 while motor vehicles reduced due to new purchasing structure”, she said.
With increasing household indebtedness of Batswana, Kenewendo said there is pressure on lending banks as they are becoming fully lent.
“ Most banks are nearing their lending peak while some have become fully lent and this has been largely driven by households which owe over 50 percent of the commercial banks credit.
“As households are experiencing decline in real wages, people have to look for alternative ways of consumption so they take personal loans,” Kenewendo said.
She also explained that there is lack of regulation on non-banking institutions and loan sharks and this contributes to increased indebtedness in Botswana. “There is need for regulation in the industry but regulatory institutions such as Non-Banking Financial Institutions Regulatory Authority (NBFIRA) lack capacity”. Kenewendo said the share of household credit to total credit currently stands at over 50 percent while businesses credit has been largely driven by the trade sector.
However the increase in arrears has been driven by business borrowing while arrears in credit to households remained high but steady. Kenewendo said there is a concern that firms are not borrowing enough and this indicates low production for the country.
In 2011the deposits were about 58 percent and loans amounted to 59 billion and in 2013 the deposits were recorded at 68 percent growth to about 48 billion while loans grew by 49 percent to about 38 billion.
By February this year, individuals (households) owed commercial banks P23.4 billion, with approximately 62 percent of this classified as ‘unsecured’ debt; meaning banks would have difficulties recovering part of or all of the due debt in case of default by borrowers. Bank of Botswana data also indicates that by February this year, individuals accounted for P1.2 billion of the P1.8 billion classified as arrears owed to commercial banks.