Household debt hits P70 bn as loan defaults more than double

Household debt in Botswana rose to P70.3 billion in December 2025, while the average bank loan default rate more than doubled to 4.7 percent from 2 percent, according to the Bank of Botswana’s latest household indebtedness survey.

Household borrowing grew by 2.5 percent from P68.6 billion in December 2024, despite a difficult economic environment marked by weak diamond demand, economic contraction and tight domestic liquidity.

Debt accounted for 26.1 percent of gross domestic product (GDP), up slightly from 26 percent a year earlier. The Bank said household debt did not currently pose an excessive risk to the financial system, but warned that prolonged economic weakness could make it harder for borrowers to meet their repayments.

Pressure on household finances was also reflected in the debt-service-to-income ratio, which remained at 63 percent in 2025. This means borrowers in the banking sector spent an average of 63 percent of their income on loan repayments, leaving less available for other expenses.

Despite the increase in defaults, the banking sector’s non-performing loan ratio remained broadly stable at 3.3 percent, compared with 3.4 percent in December 2024. The Bank attributed this partly to lenders recovering outstanding debts, writing off bad loans and restructuring repayments.

Unsecured loans continued to dominate household borrowing, accounting for 68.3 percent of the total value of bank loans. Mortgages represented 26 percent, motor vehicle loans 4.2 percent and credit cards 1.4 percent.

Borrowing costs rise

Interest rates increased across most bank loan categories. The average rate on unsecured loans rose to 18.3 percent from 12.9 percent in 2024, while credit card rates climbed to 27.9 percent from 19.8 percent.

Mortgage rates increased to 10.6 percent from 8.5 percent, while motor vehicle loan rates rose to 12.5 percent from 9.9 percent.

Outside the banking sector, micro-lenders charged an average interest rate of 25.5 percent, down from 26 percent. Hire purchase providers, however, increased their average rate to 23 percent from 21.5 percent.

The survey found that men accounted for 53 percent of household credit, compared with 47 percent for women. Borrowing was concentrated among people aged 40 to 49, followed by those aged 30 to 39 and 50 to 59.

Government employees accounted for 74 percent of bank lending to households and 79 percent of micro-lender credit. The Bank linked this to relatively stable public sector incomes and salary deduction arrangements, which make loan repayments more predictable.

More borrowers take multiple loans

The proportion of borrowers with two loan facilities rose to 21.8 percent from 16.9 percent in 2024, although 70.4 percent of borrowers still had one loan.

The increase suggests that more households are carrying multiple credit commitments, potentially adding to pressure on their finances.

Mortgage lending in Greater Gaborone also showed high borrower exposure, with the average loan-to-value ratio reaching 93.7 percent. This means mortgages covered nearly 94 percent of property values, leaving borrowers with a relatively small equity stake.

Outside Greater Gaborone, the average loan-to-value ratio was lower, at 70.1 percent.

For 2026, most banks expect household credit demand to remain broadly unchanged, while most micro-lenders anticipate an increase.

However, lenders cited stagnant wages, high borrowing costs and uncertainty surrounding the diamond sector as factors that could weigh on households and the wider economy.

The Bank said continued monitoring of household debt, loan defaults and repayment capacity would be necessary to identify emerging risks and determine whether further measures were needed to safeguard financial stability.