Katlego Pearl Lekwale – Research Consultant
The Bank of Botswana (BoB) conducts a Business Expectations Survey (BES) on a quarterly basis to understand businesses’ views on economic conditions, performance, inflation, lending rates and financing.
According to the June 2026 survey, businesses from 13 economic sectors such as agriculture, mining, manufacturing, construction, wholesale and retail, transport, accommodation and food services, finance, real estate and professional services were included.
Lending rates and borrowing expected to increase
The survey found that businesses expect lending rates and borrowing volumes to increase over the 12 months to June 2027, particularly in the domestic market.
Despite expected higher borrowing costs, businesses anticipate borrowing more to manage operations, expenses and cash flow.
However, high interest rates and strict lending requirements could make borrowing more difficult. The Bank of Botswana identified the cost of finance as the main factor negatively affecting business operations in the second quarter of 2026.
How lending rates affect businesses
Lending rates are the interest rates charged by financial institutions when they lend money.
When lending rates increase, borrowing becomes more expensive. Loan repayments may leave businesses with less money for stock, salaries, equipment and expansion. Higher borrowing costs can discourage loans and delay expansion, equipment purchases or recruitment.
When lending rates decrease, borrowing becomes cheaper. Businesses may be more willing to borrow to expand, invest in equipment or improve services. However, lower interest rates do not guarantee growth. Businesses must also consider customer demand, operating costs and their ability to repay loans.
Source of business funding
The June 2026 survey found that preference for loans declined from 43 percent in the first quarter of 2026 to 28 percent in the second quarter.
During the same period, preference for equity financing increased from 5 percent to 17 percent. Preference for combined financing methods remained at 2 percent.
Retained earnings continued to be the main source of financing. Retained earnings are profits a business keeps to fund its operations instead of distributing them to owners.
The decline in loan preference may mean businesses are becoming more cautious about borrowing or face challenges accessing credit. High borrowing costs, collateral requirements and strict documentation may limit their ability to obtain loans.
The survey also found that 45 percent of businesses identified access to credit as the main factor influencing their choice of credit market. A further 25 percent cited credit availability, while 20 percent pointed to affordability. The remaining 10 percent cited a combination of factors.
These findings show that suitable, affordable credit can be difficult to access. Banks can use these insights to improve products, while businesses compare funding options.
What does this mean for businesses?
Before borrowing, businesses should assess interest rates, repayment periods, extra charges and whether future income can cover repayments.
Businesses that struggle to qualify for loans may consider alternatives, such as reinvesting profits, bringing in investors or combining sources of finance.
Financial institutions can use these findings to understand funding preferences and barriers to credit, supporting better decisions. Regularly reviewing financing trends helps businesses plan ahead, compare suitable funding sources and manage risks. It also helps lenders identify gaps between the products offered and the needs of businesses.
We hope this article added value to you and your business.
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