NBFIRA lacks capacity to regulate microlenders
Keikantse Lesemela | Friday May 23, 2014 14:25
Speaking during the credit overview workshop recently, Econsult Economist Bogolo Kenewendo said Batswana are highly indebted with leading debts being personal loans and they can even go to an extent of taking a third loan in order to repay the existing loan but this is happening because of lack of proper regulation.
She said Bank of Botswana (BoB) has recently attempted to control the situation as it has urged banks to monitor the purpose of loans when people apply.
Kenewendo also explained that there is lack of regulation on non-banking institutions and loan shanks 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.
She indicated that the level of household debt, which is continuously increasing in the country, has been worsened by the absence of credible data on individual commitments to hire purchase schemes, salary advances, funeral schemes and informal credit arrangements.
Since 2012, there have been no subordinate rules and regulations to license and monitor the medical aid funds effectively, but the feasibility studies are ongoing to find ways to regulate the industry.
Kenewendo said the countries Botswana benchmark with are doing extremely well as they have records of the number of people who took loans from licensed micro lenders.
“NBFIRA lacks capacity as it does not have records of loans taken from micro lenders but other countries such as Namibia came to benchmark in NBFIRA but they are performing much better than NBFIRA because they have all this data. There is a problem of capacity to regulate,” she said.
Currently there are 230 micro lenders registered with NBFIRA, and only 54 have been issued licences to date. It is estimated that close to a thousand micro- lenders were operating in Botswana before the gazetting of the regulations in March 2012.
The authority relies on on-site inspections and whistle-blowing to monitor the activities of micro-lenders. NBFIRA is currently working with the police in investigations and shuts down entities operating illegally.
NBFIRA, deputy director (lending activities), Oakantse Modise said the authority is not aware of any observations that the authority lacks capacity.
“NBFIRA is not aware of any industry experts nor their observations that it lacks capacity to regulate micro lending,” she said.
However, Modise said NBFIRA considers micro lending to be effectively regulated and it continues to build capacity in all its regulatory activities of the non-bank sector.
However, in terms of improving general and specific competence in regulation, Modise said NBFIRA continuously benchmarks with other countries for international best practices and further trains and develops its staff to build requisite skills as may be deemed necessary.