Wednesday, April 14, 2021

Botswana’s NBFIs safe and sound…

The Botswana non-bank financial institutions (NBFIs) had a good ride last year as assets went up, maintaining the dominant position in the country’s financial system despite a fall in total profits, reveals the latest report from the regulator.

The Non-Bank Financials Regulatory Authority (NBFIRA) – which regulates about 775 licensed non-banking institutions – this week released its 2018/2019 annual report that depicted the NBFIs to be financially sound as the sectors’ assets increased by 4 percent to P121 billion in 2018, representing about 55 percent of Botswana’s financial system value.

The slight growth in assets was on the backdrop of impressive growth in gross domestic product (GDP) registered in 2018 – rebounding from 2017’s 2.9 percent to 4.5 percent. This translated in positive growth for almost non-banking sectors except for the capital markets which showed contraction. Despite the overall growth, the NBFIs’ pre-tax profits took a 20 percent dive to P1.3 billion following deregistration of a major player in the insurance industry.

According to the regulator’s recent report, the insurance industry recorded a decrease in size of registered entities, dropping from 298 in 2017 to the current 236 after several brokers surrendered their licences citing tough operating environment. Though the insurance industry seems huge in terms of particpants, the bulk of the industry’s assets and liabilities are concentrated in the 23 registered insurers, specifically the eight life insurers.

With total industry’s gross written premiums up from P5 billion to P5.4 billion, the life insurers accounted for 74 percent of these premiums, thus grabbing the 85 percent of market share of the industry. Still, the life insurance recorded a 34 percent decrease in pre-tax profits, falling from 2017’s P703 million to P464 million in 2018.

The retirement funds sector, made up of 85 entities, is home to 263,097 members, an increase of 1.5 percent after an increase in number of companies that introduced compulsory pension contribution. However, the sector experienced a decline in total income from P8.4 billion in 2017 to P6.9 billion in 2018 – a 17 percent contraction attributed to a 39 percent fall in investment income as a result of poor performance in the global equities market during 2018.

The total expenditure for retirement funds, during the period under review was P4.5 billion, an increase of 28 percent from the prior year. Benefit payments made to members and beneficiaries increased by 35 percent from P2.8 billion in 2017 to P3.8 billion in 2018.

“This was mainly influenced by the introduction of Regulation 35 of the Retirement Funds Regulations which opened a window for members of Preservation Funds to access their pension benefit before reaching retirement age, subject to proof of unemployment and fund membership for over 12 months and also due to retrenchment by various employers within the economy,” the report said.

The numbered of licensed entities in the capital markets increased by 2.4 percent to 82 institutions, resulting in a 32.3 percent improvement in revenues recorded at P4.1 billion. However, this was blighted by expenses which shot up by 160 percent to P1.3 billion, resulting in 7.7 percent drop in pre-tax profits to P1.2 billion.

There was a huge appetite in the lending industry as it expanded 5.6 percent following registration of new entrants, bringing the total non-bank lenders to 342, mostly accounted for by micro-lenders.

Total revenue for the micro-lending sector increased by 4.9 percent from P1.2 billion in 2017 to P1.26 billion in 2018, fuelled by a 5.2 percent increase in interest income emanating from the loan book value growth during the period under review, up by 9.8 percent during the year under review from P3.4 billion in 2017 to P3.9 billion in 2018.

Total assets for the lending industry improved by 10.8 percent to end the year at P4.8 billion against P4.3 billion in 2017. NBFIRA says the increase in total assets was generally a result of growth in other assets and the loan book value.

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