Banks� lending to business quickens
Brian Benza | Thursday June 22, 2017 17:17
Addressing the media in Gaborone this week, governor Moses Pelaelo said even though overall credit growth has been declining, lending to businesses, excluding parastatals, is increasing at a higher rate.
“Business credit growth stood at 9.3% in April 2017 compared to 3.9% in April 2016. It is projected that domestic non-mining output will be below trend in the near term, constrained by continued modest growth of household incomes and restrained economic expansion in major trading partners,” he said.
Interest rates are sitting at record low levels with the bank rate last reduced to 5.5% in August 2016.
The low interest rates environment has however not had a significant direct impact on credit growth with households and businesses’ lending capacity constrained by stagnant real wages and sluggish economic growth.
The slowdown in annual credit expansion has mostly associated with the decrease in growth in lending to households from 12.8% in December 2015 to 7.6% in December last year, largely reflecting the effect of restrained growth in personal incomes.
Deputy governor, Kealeboga Masalila said the increase in the rate of uptake of loans by businesses could be a signal of a response to the interest rate reductions.
“Responses of credit demand to interest rates changes usually come with a lag, so the rise in lending to businesses could be attributed to the cuts in the bank rate.
There are usually many other factors that businesses consider when taking up loans such as economic prospects,” he said.
A Business Expectations Survey (BES) released by the central bank this week showed that the level of optimism by businesses, though still at low levels, is improving.
According to the results of the BES, optimism amongst businesses strengthened in the first half of 2017 compared to the second half on 2016, and is expected to rise further in the survey horizon for both domestic market-oriented firms and exporters.
The BES results show that optimism amongst businesses strengthened from a confidence level of 43% in the second half of 2016 to 48% in the first half of 2017.
However, firms seem to have developed some uneasiness with the business conditions in the first half of 2017 as their confidence levels declined by three percentage points compared to their perceptions about the same period in the previous survey.
“This lower confidence level is also reflected in the lower growth forecast of 1.9% for the domestic economy by local businesses. However, in line with previous trends, more firms expect better business conditions going forward, with an overall confidence level of 55% for the second half of 2017 and 67% for the twelve-month period to June 2018,” said the central bank.
Confidence amongst domestic-oriented businesses is 48% in the first half of 2017 compared to 43% in the second half of 2016.
Looking ahead, the BES shows level of optimism will improve to 56% in the second half of 2017 and 65% in the year to June 2018.