Household borrowing, the main revenue driver for commercial banks and a bellwether of economic activity, has been growing steadily, supported by the Bank of Botswana (BoB) cuts in interest rates.
Central bank figures contained in the January Botswana Economic Financial Statistics (BEFS) show that household borrowing from the country’s commercial banks stood at P55.7 billion at the end of 2024, within which mortgages accounted for P14.8 billion.
The value of asset vehicle finance grew to P2.4 billion in 2024 compared to P2.2 billion by the end of December 2023.
However, personal loans remain by far the type of credit favoured by households, measuring P37.6 billion by the end of last year, from P35.5 billion in 2023.
Most of the country’s commercial banks reported strong retail lending growth last year, a trend that suggests that the banks raised their risk appetites in a year in which the economy suffered a recession.
First National Bank Botswana, the country’s largest bank, this week reported pretax profits of P386.9 million in its retail division for the six months to December, compared to P352.3 million for the prior period. The retail division, which covers individual customers, saw its loan book rise by about seven percent to P12.3 billion over the six months, with lower impairments.
The central bank figures show that generally, even as households increased their credit uptake last year, impairments and arrears remained contained.
BEFS figures showed that arrears on households’ loans remained moderate with the worst category of debts measured at P958.7 million in December, compared to P930 million in the prior year, despite the increase in credit uptake.
Total arrears owed by households declined from about P3.6 billion in January 2024, to P3.3 billion in December.
Analysts say that whilst banks became risk averse during and immediately after the pandemic, they loosened the purse strings from 2022 onwards, helped by more established credit risk assessments and the ability to incorporate Artificial Intelligence into these systems.
