Released by the Bank of Botswana (BoB), the 2020 Banking Supervision Report indicates that total household debt as a proportion of total GDP increased to 23.7 percent in 2020 from 20.3 percent in 2019.
Similarly, commercial bank mortgage lending to GDP ratio increased moderately from 4.9 percent in 2019 to 5.6 percent in 2020. The Banking Supervision Report shows that the broader ratio of mortgage lending to GDP increased from 7.1 percent in 2019 to 8 percent in 2020, indicating an important role of statutory banks in mortgage financing. Statutory Banks include Botswana Building Society.
According to the report that was released by the bank of Botswana this week, the low level of mortgage lending remains a concern, especially for the banking sector dominated by unsecured household lending, and detracts from the potential welfare benefits of appropriately funded expansion of residential housing.
Banking credit as a share of total GDP grew from 31.8 percent in 2019 to 36.3 percent in 2020. Regarding the overall sectoral size, the ratio of banking assets to GDP increased from 50 percent in 2019 to 57.1 percent in 2020, while the relative size of banking assets to non-mining GDP increased from 59 percent in 2019 to 64.5 percent in 2020. The report highlights that the increase in these indicators was largely a statistical outcome of the growth in banking credit (4.4 percent) and banking assets (4.6 percent) compared with a decline of 8.5 percent in nominal GDP, rather than real progress in financial development.
The increase of 7.3 percent in household sector loans in 2020 was slower than the 13.8 percent in the previous year. Personal (mostly unsecured lending), mortgage and motor vehicle loans increased by 9.6 percent, 4 percent and 2.8 percent to P29.8 billion, P10.1 billion and P2.1 billion, respectively. Credit cards declined by 27.7 percent to P709 million in the same period.
The growth rates of most components of household loans was as a result of the negative effect of the COVID-19 pandemic on the economy. The report notes that the resultant shutdown of businesses and loss of employment reduced the borrowing capacity of retail customers. In 2020, personal loans constituted the largest proportion (70 percent) of loans and advances to the household sector and were higher than 68 percent in 2019 while the share of mortgages was unchanged at 24 percent.
The household deposits to GDP ratio increased to 9.4 percent in 2020 from 8.1 percent in 2019, largely reflecting the contraction in GDP. The ratio of pension fund assets to GDP increased from 47.2 percent in 2019 to 58.2 percent in 2020, as pension fund assets grew by 12.9 percent to P105.2 billion.
According to the report, as at 31 December 31, 2020, overall household savings, including pension funds, in the banking sector amounted to P122.2 billion compared with the household borrowing of P42.9 billion. Therefore, the household sector was a net saver in the economy.
