In November 2011, BoB decided to limit the amount of Bank of Botswana Certificates (BoBC) issued to absorb excess liquidity to P10 billion. The bank hoped that the P3 billion or so in excess liquidity that returned to commercial banks would be channelled "towards financing viable projects that would support economic development and diversification".However, data released by BoB on Wednesday suggests that banks channelled most of the excess liquidity to higher household loans, a trend associated with inflationary, unproductive spending and the worsening of individual indebtedness and consumerism.
According to the data, while credit growth to households rose to 28.5 percent in 2012 from 2011, the growth in lending to businesses slowed to 17.8 percent from 36.9 percent. Year-on-year credit growth for households was particularly high in October, November and December last year, as the retail and banking sector aggressively exploited the higher spending by consumers over the festive season.In absolute figures, households owed commercial banks P19.6 billion by December, with 68 percent of this classified as unsecured. While households accounted for nearly 57 percent of total bank loans in December, they only made up 21 percent of total deposits.Analysts who spoke to BusinessWeek said with interest rate margins generally static, commercial banks were eager to lend to households to secure higher rates and volumes of new business.
