Thursday, June 13, 2024

Considerable disparity in Botswana household incomes

The second quarter of 2023 revealed a mixed financial outlook for Botswana’s consumers, with some experiencing a rise in income, others expecting an increase and some consumers anticipating their incomes to fall, according to TransUnion’s Consumer Pulse Study for the second quarter of 2023.   

TransUnion’s Consumer Pulse survey of 401 adults was conducted in partnership with third-party research provider, Dynata. Adults 18 years of age and older residing in Botswana were surveyed using an online research panel method across a combination of desktop, mobile and tablet devices.

According to the study, there was a considerable disparity in Botswana household incomes during the period, 37 percent of respondents witnessed an increase, while 25 percent experienced a decrease, and the remaining 38 percent observed no change.

“Such variations highlight the impact of economic conditions and personal circumstances on the financial situation in Botswana. Interestingly, the study also found 75 percent of consumers remained optimistic their incomes would increase in the next year. However, despite feeling comfortable with their financial commitments, a worrisome 34 percent of respondents were concerned about being able to meet their bills and loan obligations,” the study report said.

Those who experienced an increase in their incomes attributed it to various reasons with new business ventures cited the most at 22 percent followed by increased salary at 20 percent and found new employment at 14 percent. Job loss was the primary cause of decreased incomes, highlighting the significance of employment stability for households’ financial well-being, according to the research.

Due to these trends, many families made budget adjustments in the second quarter, 63 percent had to cut back on discretionary spending, such as canceling subscriptions or memberships and reducing digital services expenses.

To meet their financial obligations, consumers employed a range of tactics, with 41 percent planning to make partial payments, while 28 planned to dip into their savings. A further 24 percent planned to rely on the help of friends or family members through borrowing.

Looking toward the future, respondents projected various adjustments to their household spending in the next quarter. While 38 percent anticipated increased bills and loans, and 53 percent expected a continued decline in discretionary spending, 45 percent intended to augment their retirement and investment contributions.

However, a cautious 32 percent expected to reduce large purchases, such as appliances and vehicles, signifying a prudent approach to significant expenditure in uncertain times.

Access to credit and lending products is crucial for financial goals, as expressed by 94 percent of respondents, but 65 percent felt they lacked adequate access to credit and lending products. Younger generations were especially concerned; 73 percent of Gen Z (born 1995–2004) and 62 percent of millennials (born 1980–1994) were unsatisfied with their credit access.

Plans for new credit or refinancing over the next year differed amongst consumers. One in three Botswana consumers planned to acquire new credit or refinance existing credit, while two-thirds didn’t foresee such activity. Interestingly, Gen X respondents showed a more proactive approach; 44 percent planned to apply for new credit products within the next year, highlighting generational differences in credit engagement. Overall, 27 percent planned to apply for a personal loan, 22 percent a new mortgage, and 21 percent a credit card. Preferences varied by age: Gen Z sought credit cards and millennials eyed home loans most.

From the study findings, 41 percent of respondents considered applying for credit but ultimately abandoned their plans, whereas 59 percent followed their intent. The main reasons for abandoning applications were finding an alternative source (26 percent) and the perceived cost of new credit or refinancing was too high (24 percent).

While 93 percent of Botswana consumers across all age groups recognised the importance of monitoring their credit reports, the practice was less widespread than expected. About 43 percent of respondents monitor their reports at least monthly, and 32 percent didn’t monitor their credit reports at all.

“This disconnect suggests a potential need for financial education and awareness initiatives.”

Almost half (46 percent) of respondents believed their credit scores would increase if businesses incorporated non-standard information into their assessments, such as rental payments, gym membership payments, short-term loan history, and buy now, pay later services.

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