Saturday, May 25, 2024

Botswana Banks see fewer bad loans as household credit slows

Botswana banks saw the size of their bad loans shrinking at the end of last year, statistics from the country’s top banking watchdog – Bank of Botswana showed this week. 

According to the 2021 Monetary Policy Statement Policy – which gave an update on the performance of the country’s banking sector in 2020, commercial banks maintained good quality assets with a decline in credit default rates. 

The central bank figures shows that the ratio of non-performing loans (NPLs) to total credit was 4.3 percent in December 2020, compared to 4.9 percent in December 2019. 

“Nevertheless, there continues to be a risk to asset quality associated with the high proportion of the relatively more expensive unsecured lending (at 71.5 percent of household credit in December 2020) in commercial bank credit”, reads part of the MPS policy statement. 

The BoB figures further shows that the annual growth in commercial bank credit decreased from 7.6 percent in December 2019 to 4.5 percent in December 2020. The deceleration in credit growth is, in part, indicative of the somewhat timid demand for credit, as well as the restrictive supply of credit by banks on account of uncertainty related to the COVID-19 pandemic. 

A breakdown of figures for the period under review shows that the annual growth in lending to the business sector contracted by 0.5 percent, following a 1.7 percent decrease in the corresponding period in 2019. 

The households on the other end recorded a decelerated growth from 13.7 percent in December 2019 to 7.3 percent in December 2020. 

Meanwhile, annual growth for unsecured loans10 decreased from 18.7 percent to 9.8 percent in the same period. The annual growth in mortgage loans fell from 3 percent in December 2019 to 2.1 percent in December 2020. Consequently, the share of mortgages in total bank credit to households decreased from 24.9 percent to 23.6 percent in the same period.

“In general, the level and rate of increase of credit continue to be supportive of economic activity”, Bank of Botswana said this week. 


Read this week's paper