Banks cash less on household borrowing

Household loans down to 5.4 percent Improvement in lending to businesses reported Household debt currently stands at P54.8 billion. Botswana’s commercial banks had a tough time for the better part of 2022, thanks to a significant decline in the household loans income stream as inflation reduced borrowing power. The Bank of Botswana (BoB) has revealed the decline in household loans in its Monetary Policy Report for December 2022, indicating that year-on-year household loans decreased from 8.5 percent in September 2021 to 5.4 percent in September 2022, signifying loss in banks revenues. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] Household lending remained the fattest cash cow for commercial banks as more individuals raised loans until emergence of COVID-19 caused household borrowing to take a downward trend. BoB says the lower growth in household credit was mainly attributable to a decrease in personal unsecured lending and a contraction in motor vehicle loans in the year to September 2022. However, property and credit card loans increased during the period under review. “Share of the household sector in total lending by commercial banks cut from 65.4 percent in September 2021 to 64.8 percent in September 2022,” the Monetary Policy Report says. “Lending to the business sector increased by 8.4 percent in the year to September 2022, higher than the 5.5 percent expansion in the corresponding period in 2021,” The central bank also notes that credit to the businesses excluding parastatals also increased by 11.2 percent in the year to September 2022, compared to 3.9 percent increase in September 2021. “The annual increase in credit to businesses excluding parastatals was mainly due to utilisation of loan and overdraft facilities by some companies in the real estate, manufacturing, agriculture, finance, business services and trade, as the economic activity opened, following the end of the State of Public Emergency in September 2021,” the report says. Credit to parastatals decreased by 22.1 percent in the year to September 2022, as compared to the 28.4 percent expansion in the 12 months to September 2021 due to pending of all overdraft facilities that were extended in August 2022. In addition, commercial bank credit decreased from growth of 7.4 percent in September 2021 to 6.4 percent in the 12-month period to September 2022. According to the report, the unbearable slower growth in commercial bank credit was in part indicative of the decrease in loan uptake by households and a possible reflection of the effects of the recent policy tightening by BoB, which has had a dampening effect on demand. Financial market observers say the economic slowdown has reduced businesses' appetite for loanable funds while static salaries and eroded disposable incomes have pushed households into further debt. Commercial banks have complained that the reduction in household borrowing could impact their loan book growth while on the other hand household debt to banks may increase. The latest household indebtedness survey for 2021 indicates that banks are the most owed, having financed 88.9 percent of the debt. Household debt is currently standing at P54.8 billion. Government employees (including parastatals) accounted 59.8 percent), followed by private sector employees (36.9 percent). According to the report, the self-employed accounted for a 2.7 percent while the unemployed individuals accounted for 0.6 percent of total household borrowers. [/ihc-hide-content]

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Banks cash less on household borrowing

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