Credit growth remains damp

Credit growth has generally been under pressure in the last two years, as the diamond downturn has weighed on the economy, specifically triggering a liquidity crunch in the banking sector. Bank of Botswana figures indicate that credit growth rose to 8.5 percent in September last year, from 7.3 percent in August, before sliding in the months after that to 2.5 percent in January. However, the banks marginally increased their output of loans in February, suggesting either a temporary uplift or signal of improving conditions.

The country’s banks have generally tightened their credit output and enhanced their collections in response to the liquidity crunch in the financial sector. Commercial banks’ collective profits broke a four-year streak of growth, declining by about nine percent to P3.79 billion last year, as they were impacted by broader economic pressures that saw their provisions for bad debts rise fourfold.