Metshelo key to higher national savings

Editor | Tuesday September 11, 2012 00:00

Essentially, national savings, or a bedrock of earnings starting from individual level, are critical for the development of a sound financial services sector as well as household stability and national wealth. In economic terms, national savings can be thought of as the share of the national output set aside for building the country, as divided into public and private savings. For Botswana, it is this last category - private savings and more particularly household savings - that has been a thorn in the flesh for fiscal and monetary authorities over the years. In other economies, household savings directly fund public and private sector activities through bank loans and investment in bonds and treasury bills, translating into government and private sector investment, leading to more jobs, more incomes and more savings, a healthy cycle. However, for Botswana, blossoming diamond exports have largely insulated households from their responsibility to support economic growth, providing earnings directly into national coffers and boosting sector-wide economic growth in spite of the low level of savings by workers. The scarcity of pension schemes and other binding savings arrangements for the formally employed, particularly in the private sector, has worsened the situation. Household savings are critical at a purely personal level as cover for a 'rainy day', the maintenance of standards of living post-retirement and the reduction of a reliance on government handouts. Metshelo or informal cooperative savings schemes have long bridged the gap between the desire for the benefits of saving and the lack or inaccessibility of formal savings.  While short-term in nature, they have provided many families with the same cushion one would reap from personal savings accumulated and kept in formal financial schemes. A World Bank study published in May 2012 estimated that 14 percent of adults in Botswana engaged in informal savings activities, a figure placing the country among Africa's top 10 and on the same standing with continental giant, South Africa. The formal sector has finally caught up with this tried and trusted method of household savings, through the announcement last week that Barclays Bank of Botswana had introduced an account tailor-made for metshelo. The account specifically addresses the hurdles metshelo members have faced in keeping their funds, which centre around the fact that most of these schemes are unregistered and thus do not qualify for mainstream commercial banking products. With the new initiative, three or more people may approach Barclays, provide Omang and proof of residence, confirm existence of the motshelo and receive an account, chequebook and SMS banking facilities.

                                                                             Today's thought

'It is incumbent upon each of us to improve spending and savings practices to ensure our own individual financial security and preserve the collective economic well-being of our great society.'

                                                      - Ron Lewis (US House of Representatives member 1994 -2009)