Monday, August 8, 2022

BBS mulls de-mutualisation as it outgrows its business model

In a bid to tap into new banking opportunities in the country, Botswana’s largest building society and mortgage outfit, BBS, says it will in the near future approach government with the idea to de-mutualise.

If the Ministry of Finance supports the idea, the Act that governs the society will need to be amended to allow it to get a banking license and utilise its asset base to introduce other products that are currently provided by commercial banks.

“You will agree with me that the society has outgrown its current business model,” BBS Managing Director, Pius Molefe, said.

The idea to privatise has been mooted by the society for the past seven years, but was delayed by other factors. However, with the merger of two other states underpinned entities (BSB and BotswanaPost) on the cards, the society would like to convince government to allow it to increase banking products offering.

BBS, which was established in 1976 with an asset base of only P4.11 million, currently boasts of asset base of P2 billion and about 200, 000 clients that include the young.

“It is time to convert the institution into a full service commercial bank,” said Molefe. “In this regard, the society will be approaching government in the near future with proposals on how this could be achieved,” he added.

BBS currently trades under the Building Societies Act, which restricts the society from offering an array of commercial banking products.

Therefore, for the society to tap into holistic banking arena and explore other product offerings, the Act or the Rules of the Society have to be amended.

For example, the Act does not allow the society to offer personal loans to its customers and consideration to offer unsecured loans will only be explored once amendments have been made to the Building Societies Act or on the Rules of the Society.

Although government is a major shareholder in BBS, the society is currently owned by its members (rather than external shareholders), which pays interest on deposits and lends money to enable members to buy their own homes.

Building societies provide an alternative to banks and other credit providers as they offer a different kind of banking based on cooperation, mutual benefit and customer focus.

BBS is amongst the few indigenous institutions that provide property finance.

During the first 10 years of operation, the society was initially restricted by law to lend only against the security of immovable urban property. However, the Act was amended in April 1986 to permit lending in rural areas.

If the idea to de-mutualise gets the support of government, Botswana is likely to have indigenous banks as BSB/ BotswanaPost merger will also produce a Postbank.
Government wants the proposed Postalbank to be tailor-made along the lines of the giant Japanese Postal Bank or the South African Post Bank and take head on established commercial banks.


Read this week's paper