Sunday, May 28, 2023

Here is what the banks have been paying out

The Minister of Finance Peggy Serame revealed in Parliament that total dividends paid out by all commercial banks, excluding BBS Limited Bank in the last 10 years, from 2012 to 2021, amounted to P8.6 billion.  She stated that consistent with the prudential requirements, as set out in the Banking Act (Cap 46:04) and Banking Regulations, no bank in Botswana is allowed to pay dividends if it does not meet the minimum statutory liquidity and capital requirements.

“The Ministry of Finance is satisfied that the framework adopted by the Bank of Botswana ensures an appropriate balance between profitability of banks sustainable provision of services and fair and equitable pricing of banking products and services,”said Serame.

She also revealed that management fees paid out to parent companies domiciled outside Botswana amounted to P5.4 billion.

She further stated that Bank of Botswana has a framework for the regulation and monitoring of bank charges in line with the Bank of Botswana Act. She added that under this framework, prior to imposing any new bank charge (upward adjustment of existing bank charge), a licensed bank is required to submit the proposed banking tariff schedule (fees, commissions and service charges) for assessment for fairness and reasonableness in relation to the cost of provision of the service.

“Notwithstanding perceptions that bank fees and charges in Botswana are high, empirical evidence has shown that non-interest income derived from bank charges and commissions in Botswana compare favourably to the levels reported elsewhere in the region,”said Serame.

She also stated that the Bankers’ Association of Botswana conducted a comparative study on bank charges in 2014, which concluded that, within the SACU Region, bank charges in South Africa, Namibia and Lesotho were higher than in Botswana by 48 percent, 76 percent, and 65 percent, respectively. She added that furthermore, fees charged by banks in Tanzania, Uganda, Zambia and Kenya were 55 percent, 56 percent, 142 percent and 310 percent, respectively, higher than those charged by Botswana banks.

“While these studies are dated, these results demonstrated that bank charges in Botswana were competitive by regional standards,” she said.

Serame stated that as a proportion of total income, non-interest income for commercial banks in Botswana averaged 40.4 percent in 2018, 39.4 percent in 2019, 38.8 percent in 2020, 40.5 and 40.4 percent in 2021 and 2022, respectively. She added that despite operating in a low interest rate environment for the past five years, non-interest income as a proportion of total income has remained relatively unchanged at an average of 40 percent. Meanwhile Serame also said that the non-interest income derived from commercial bank charges and fees are, in general, commensurate with the cost of provision of banking services in Botswana.


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