The latest annual central bank report on banking supervision has indicated that loans and advances for the household sector grew by 4.8 percent.
According to Bank of Botswana (BoB), statistics household borrowings shot from P45.6 billion in 2021 to P47.8 billion in 2022, accounting for 65 percent of banking industry gross loans and advances.
Despite the upward spiraling effect, the central bank said last year’s borrowing was at a slower rate compared with a 6.2 percent growth in 2021.
"The slower credit growth was potentially a reflection of tightening monetary conditions as the Bank increased its Monetary Policy Rate (MoPR) in 2022,” said BoB report compiled under the immediate former Governor, Moses Pelaelo.
The loans composition, according to BoB comprised of personal loans leading the pack at 72 percent, mortgage at 22 percent, motor vehicle at four percent while credit card and other loans followed at two percent.
Statistics further revealed that personal, mortgage, credit card and other loans increased by 6.2 percent, 1.1 percent, and seven percent to P34.2 billion, P10.6 billion, and P888.9 million, respectively, while motor vehicle loans declined by 0.4 percent to P2 billion in 2022.
Observation from the central bank indicates that household credit is skewed towards personal loans relative to mortgages because the application process for acquiring mortgage is longer and stringent than for personal loans.
“In addition, maximum amounts for the personal loan have increased for most banks over the years. As a result, customers prefer taking personal loans to finance building or buy property,” said Pelaelo.
Despite this trend central bank says household debt was equivalent to 19 percent of nominal GDP in 2022, a decrease from 22 percent in 2021, while the ratio of commercial bank mortgage to nominal GDP decreased from 5.1 percent to 4.2 percent in 2022.
“The low level of mortgage nevertheless remains a concern, notably for a banking sector characterised by a disproportionately high share of unsecured lending to households; that level of lending constrains the extent to which an appropriately bank-financed growth in housing investment, including residential property, can contribute to wealth creation and social welfare.
“It is expected, however, that the recent amendment of the pension fund legislation to permit withdrawal of funds to facilitate house ownership will increase investment in property by households.”
Meanwhile BoB has highlighted that the distribution of private business loans and advances for the period 2018–2022 saw an increase in agriculture, forestry and fishing; commercial real estate, electricity and other sub-sectors.
On the other hand, tourism and hotels; trade, restaurants and bars; and business services sub-sectors decreased in the same period.
“Consistent with the increase in market share in credit distribution for agriculture and commercial real estate sub-sectors, output increased for the sub-sectors, contributing to growth of GDP.
“The share of agriculture in non-mining GDP, however, remained unchanged. In addition, although at a lower rate than in 2021, output for manufacturing and construction was positive.”
Meanwhile, the growth of the tourism sub-sector output recovered from -1.5 percent in 2021 to 3.3 percent in 2022.
According to Bank of Botswana (BoB), statistics household borrowings shot from P45.6 billion in 2021 to P47.8 billion in 2022, accounting for 65 percent of banking industry gross loans and advances.
Despite the upward spiraling effect, the central bank said last year’s borrowing was at a slower rate compared with a 6.2 percent growth in 2021.
"The slower credit growth was potentially a reflection of tightening monetary conditions as the Bank increased its Monetary Policy Rate (MoPR) in 2022,” said BoB report compiled under the immediate former Governor, Moses Pelaelo.
The loans composition, according to BoB comprised of personal loans leading the pack at 72 percent, mortgage at 22 percent, motor vehicle at four percent while credit card and other loans followed at two percent.
Statistics further revealed that personal, mortgage, credit card and other loans increased by 6.2 percent, 1.1 percent, and seven percent to P34.2 billion, P10.6 billion, and P888.9 million, respectively, while motor vehicle loans declined by 0.4 percent to P2 billion in 2022.
Observation from the central bank indicates that household credit is skewed towards personal loans relative to mortgages because the application process for acquiring mortgage is longer and stringent than for personal loans.
“In addition, maximum amounts for the personal loan have increased for most banks over the years. As a result, customers prefer taking personal loans to finance building or buy property,” said Pelaelo.
Despite this trend central bank says household debt was equivalent to 19 percent of nominal GDP in 2022, a decrease from 22 percent in 2021, while the ratio of commercial bank mortgage to nominal GDP decreased from 5.1 percent to 4.2 percent in 2022.
“The low level of mortgage nevertheless remains a concern, notably for a banking sector characterised by a disproportionately high share of unsecured lending to households; that level of lending constrains the extent to which an appropriately bank-financed growth in housing investment, including residential property, can contribute to wealth creation and social welfare.
“It is expected, however, that the recent amendment of the pension fund legislation to permit withdrawal of funds to facilitate house ownership will increase investment in property by households.”
Meanwhile BoB has highlighted that the distribution of private business loans and advances for the period 2018–2022 saw an increase in agriculture, forestry and fishing; commercial real estate, electricity and other sub-sectors.
On the other hand, tourism and hotels; trade, restaurants and bars; and business services sub-sectors decreased in the same period.
“Consistent with the increase in market share in credit distribution for agriculture and commercial real estate sub-sectors, output increased for the sub-sectors, contributing to growth of GDP.
“The share of agriculture in non-mining GDP, however, remained unchanged. In addition, although at a lower rate than in 2021, output for manufacturing and construction was positive.”
Meanwhile, the growth of the tourism sub-sector output recovered from -1.5 percent in 2021 to 3.3 percent in 2022.
