Letshego moves to curb high indebtedness

Keikantse Lesemela | Monday October 6, 2014 07:00

 

Presenting the financial results for the half year ended 31 July 2014, Letshego Holdings Managing Director, Chris Low said as the government has raised a concern about high levels of indebtedness, they have introduced a central system in which they limit the amount and number of loans a customer applies for.

“We are working with the government to set limits on indebtedness. We have the credit reference check system, which allows the customer to have only one loan at a time. There is inbuilt checks and balance in the system, we do not encourage high indebtedness,” he said.

He said the majority of loans they give to customers are used for education, health and business purposes. “Through the credit check system we are able to limit the amount we give to a customer because we do not encourage over borrowing. We lend to a level we feel it is affordable,” said Low.

Letshego, which operates in 10 African countries, gets the lion’s share of its profits from Botswana. Concerns have been raised about the high level of indebtedness amongst households with individuals borrowing   simultaneously from multiple sources such as metshelo, banks and hire purchase. 

While exact amounts of household’s indebtedness to different institutions outside the banking system are not available, Bank of Botswana statistics show the rate of credit uptake by households has slowed pace since the beginning of the year following rapid growth experienced in the past three years. 

According to the latest financial statistics report released by the Bank of Botswana (BoB), credit growth by households has eased from as high as 24 percent at the end of 2013 to under 16 percent in May this year.

Low said initiatives are ongoing to execute a phased diversification strategy of transforming the group into a broader financial services provider.  He highlighted that the company has already entered the mining sector as an adjacent customer segment in Botswana’s portfolio as competition in the market is increasing. 

“There is major competition from the commercial banks for retail unsecured lending, so we need to defend,” he said. Letshego services over 250,000 customers through its branches in 10 countries. It is the first consumer lending company to be established in Botswana to provide unsecured loans to formally employed clients.