Banking sector growth sluggish in 2011 – Bank of Botswana
by Ngonidzashe Dzimiri
The Bank of Botswana (BoB) banking supervision 2011 annual report has recorded slow growth of the banking sector in 2011 compared to 2010 reflecting the lingering challenges in the overall economic environment.
For the year under review, 2011, the structure of the bank industry in Botswana remained unchanged with no competition in the industry.
Although the Herfindahl Hirschman index (HHI) for the banking sector has been trending downwards between 2007 and 2009, it has remained unchanged at 0.19 between 2010 and 2011, indicating little or no change in competitiveness in the banking industry.
“Increased competition in the banking sector is desirable as it is expected to spur institutional efficiency, innovation and superior service delivery,” stated the report.
The report highlighted that the absence of competition in the industry is supported by lack of change in market share of total assets, deposits and loans advances between large and small banks.
“The dominance of the four largest banks in the industry has given rise to an imperfectly competitive market structure,” the report added.
Moreover, the report said that the introduction of mobile money payment services, which has been successful in other African countries, is a welcome development in Botswana.
BoB has been reassured that all the necessary risk mitigation strategies have been put in place, and will also closely monitor the uptake increased competition in the banking sector, which is desirable.
Further the report stated that the financial deepening indicators declined during the period under review in line with the difficult economic conditions. The broad measure of money to GDP ratio dropped from 42 percent in 2010 to reach 38 percent in 2011 due to much slower growth of broad measure as compared to the increase in GDP.
Nevertheless during 2011, no new bank was licensed not withstanding numerous inquiries on license application procedure and requirements by potential foreign and local investors, revealed the report.
The staff compliment of the banking industry stood at 4300 at the end of 2011 having grown by 5 percent from 4097 in 2010. The African Banking Corporation recorded the highest growth rate at 25 percent due to the bank’s entry into retail market, followed by Standard Chartered Bank with 13 percent.
The majority of banks recorded growth rates below 5 percent with Kingdom Bank being the only bank to experience a decline of 24 percent. In addition, the report said the number of expatriate staff employed by the banking industry decreased by 5 percent in 2011 from 88 to 84.