Banking costs too high - Matambo

KEIKANTSE LESEMELA
Correspondent | Friday July 20, 2012 00:00

 

He also noted that unfavourable public perceptions about the level of disclosures, cost of banking services and responsiveness of banks to public complaints, still exist.

'It is my sincere hope that as more banks and branches open in the country, competition will increase and thereby reduce the relative costs of banking services,' he said during the official opening of Standard Chartered's 14th fully-fledged branch at the Airport Junction Mall last week. 

According to published annual statistics, the banking sector continues to perform relatively well but this positive performance does not translate into lower costs of banking for clients.

The 2011 Bank of Botswana annual report shows that total commercial bank assets grew by 4.9 percent from P49.4 billion in December 2010 to P51.8 billion in December 2011 while loans and advances and other assets grew by 27.2 percent and 59.2 percent respectively.

'These figures translate into positive profitability ratios, which are high by international benchmarks,' he said.  Matambo highlighted that banks should match this with lower transaction costs.  'It should therefore follow that profitability should be matched by lower transaction costs, with high quality of services and improved access to financial services for the majority of the population,' he noted.

The Bank of Botswana 2011 annual report also reveals that even though Botswana performs better in the region, in terms of access to finance, such access still varies widely across segments of the population. 

This Matambo noted adding that lack of banking services continues to worry government.  'The reality is that those without employment and regular income, the poorer sections of the community and people in the rural areas are still lagging behind in enjoying banking services,' he said.

Answering a question in Parliament early this month about specific efforts made by government and Bank of Botswana in sensitising financial institutions, such as banks, to set up operations in rural areas, Matambo said government, in collaboration with the Bank of Botswana, encourages Botswana-registered banks to establish branch networks in all parts of the country in a bid to extend the provision of banking facilities to a wider population

'In pursuit of the national development objectives, the government has taken a number of positive steps including provision of physical infrastructure, such as roads, water, schools, clinics and hospitals, electricity and telecommunications to most rural areas in Botswana, and continues to do so.

'These government initiatives should serve as incentives for private companies and institutions, including financial entities to establish a presence in rural areas. Madam Speaker, the decision by any bank to locate a branch in any area is a function of the outcome of a cost and benefit analysis.

In other words, the location decision is informed by an assessment of the viability of the business, and such assessment is best undertaken by the banks themselves.

It is worth stating that, in some cases, the small population size in some rural areas acts as a disincentive for banks to open branches in such areas despite the availability of public infrastructure,' he told Parliament.

He however assured that banks and other financial service institutions in Botswana have been making all efforts to extend their presence to rural areas in a number of novel and innovative ways, including through mini-branches, mobile branches, ATMs, internet and cell phone banking, point-of-sale terminals and smartcard technologies.

Matambo also said government has decided to merge the Botswana Savings Bank and the Botswana Postal Services in an effort to exploit the synergies between the two institutions, notably the use of the extensive postal network as a delivery channel for banking services by the Botswana Savings Bank.

'This is expected to enhance access to financial services by people in rural areas,' he said.