NBFIRA scrambles to regulate 'fast-growing' pawn sector

Cash on wheels: The pawnshop industry is thriving in Botswana FILE PIC
Cash on wheels: The pawnshop industry is thriving in Botswana FILE PIC

The Non-Bank Financial Regulatory Authority (NBFIRA) is developing regulations to manage the pawn sector, which it says is ‘fast-growing,’ with a loan book of about P15 million for the 15 operators who reported their assets in 2019.

In a recent research report, NBFIRA said the industry’s loan book was believed to be higher, as more data was yet to be collected.

The regulator says the pawnshop business is a major contributor towards the financial inclusion agenda, as loans are granted to borrowers who can pledge collateral in the form of moveable property, in exchange for the loans.

“Pawnshops are fast-growing in Botswana and are recognised as Non-Bank Financial Institutions in the NBFIRA Act of 2016,” NBFIRA’s researchers state. “However, there are still no specific regulations promulgated for the sector and NBFIRA is in the process of developing the relevant regulatory framework for pawnshops and other non-bank lenders in its regulatory ambit.” Analysts said the absence of regulations for pawnshops meant that undesirable practices and trends could take place beneath NBFIRA’s control. In addition, the lack of regulations could be a systemic risk to the sector as pawnshops could be set up without appropriate capital, while borrowers could find themselves with little recourse in the case of complaints. As of December 31, 2020, there were 93 exempted pawnshops in Botswana which are mostly concentrated in urban and peri-urban areas, with 56% and 13% based in Gaborone and Francistown respectively.


The common products that exempted pawnshops accept as pawn items are household goods such as electronics, and motor vehicles. A relatively new pawn arrangement is the pawn-and-drive product, which has proven to be the most preferred among borrowers.

“In this arrangement, clients pawn their vehicles and in place of keeping the pawned vehicles, as has been the custom historically, pawnshops take custody of the vehicle registration book commonly known as the blue book and allow the client to use the vehicle for the duration of the loan.

“In the event that the client fails to honour the terms and conditions of the agreement, the vehicle is repossessed,” NBFIRA researchers said. The regulatory authority said this arrangement has proven to be attractive to clients in that they continue to enjoy the convenience of using their vehicles for the duration of the loan.

It is also preferred by pawnshops as it cuts storage costs that the pawnshop would incur in the traditional setting, where the pawnshop would typically have the pawned vehicle.

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