Saturday, February 24, 2024

COVID-19 spoils bankers party

The country’s local lenders continue to grow their balance sheets, defying the headwinds that have affected other sectors, ramping up on loans in the first month of the year, following the usual tradition of customers replenishing their accounts after festive spending. But the banks will have to adjust their sails this year to weather a storm that has spared no other industry. 

The latest financial statistics available from Bank of Botswana (BoB) shows that total deposits held by banks increased by 0.4 percent from December to P76 billion in January, setting a new record in the local banking industry for the biggest deposits held by banks.

In the now familiar trajectory, the growth in deposits in the first month of the year was spurred by businesses which account for 68 percent percent of total deposits. Households trailed with P16 billion worth of deposits, representing 21 percent of total deposits held at banks.

Another record was also set in the total credit extended by banks, jumping by 1.1 percent from December to P63.5 billion in January, also making it the largest outstanding loans in the history of the country. In another known pattern, households were responsible for the bulk of the loans, holding 63.7 percent of the total debts, while businesses account for 36.5 percent of outstanding loans. 

The appetite for credit by households was expected to grow in the second half of the year, bolstered by government workers who were supposed to get wage increases in April. However, that decision has since been suspended as the government battles to contain Covid-19, a viral infection that has become a global pandemic, infecting millions and killing hundreds of thousands.

As a response, countries worldwide have imposed measures that have negatively affected economic performances due to movement restrictions aimed at slowing the spread of the disease. Businesses considered non-essential have been temporarily closed, affecting various value chains, and putting pressure on non-governmental workers’ wages.

While the coronavirus continues to cause uncertainty in markets, businesses have taken cautious approaches which might result in job losses. However, in Botswana, companies have been barred from retrenching workers, instead they have been advised to tap on the government’s announced P2 billion Covid-19 relief package. The size of the package will increase to P5 billion, according to government, as it ramps up efforts to stabilise the economy.

Banks have also factored in the Covid-19 impacts, allowing some of their affected customers to apply for three months loan repayments holidays. Furthermore, the government has guaranteed some loans that will be taken by affected businesses, also as part of the relief package.


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