One of South Africa’s largest home-shopping retailers which already does roaring business in Botswana, HomeChoice, is expanding its footprint with its entry this month, into the country’s lucrative money-lending business. HomeChoice will be conducting this business through one of its subsidiaries, FinChoice, which will provide personal loans of between the equivalent of R100 and R30 000 to be repaid between one and 36 months.
FinChoice’s entry into this market has been as swift as it is innovative. The parent company, HomeChoice, has already built a large clientele in Botswana. Last Wednesday, HomeChoice notified its “valued customers” about this development through a text message that read in part: “One of the most affordable loan products is about to arrive in Botswana! Look out for FinChoice coming soon.” As it turned, “soon” meant the very next day when another message stated: “FinChoice ÔÇô brought to you by HomeChoice, has arrived in Botswana!” The message went on to offer pro-rated loan amounts to customers. Those who want who take up this offer have to send back a “reply loan” message to a Mascom Botswana number or call a local landline number. On its website, FinChoice says that it enters into loan agreements “telephonically or through electronic channels, at our offices, at the time when you accept the loan agreement terms.” Another one of its terms allows customers “to apply for a loan using your mobile phone, the internet or other electronic channels. If you apply through an electronic channel, we generate, send, receive and store information electronically.” No other money-lending business (colloquially called “cash-loan”) in Botswana does this. What explains this apparent risk-taking is that HomeChoice is dealing with people (“valued customers”) that it has built a relationship with and believes it can trust.
The success of money-lending in Botswana underlies a grim and most obvious reality ÔÇô most people live beyond their means. In extreme cases and largely as a function of keeping up with the Joneses, some parents send their children to expensive boarding schools in South Africa and pay school fees with money lent to them by loan sharks. There have also been instances when some taken out these loans to get married. According to the World Bank says, consumer spending in Botswana has now replaced diamonds as the engine of economic growth. That explains why shopping malls are mushrooming all over the country.
The money-lending business has become so ubiquitous in public life that it has even derailed trade unionism, especially that of the public service. To all intents and purposes, the latter have become money-lending operations that most civil servants join with such understanding. Some civil servants belong to many unions because that gives them access to more “benefits” ÔÇô which actually means loans they have to repay later.
This situation has had a deleterious effect on national household debt and while the Banking Supervision Annual Report 2016 from the Bank of Botswana notes some improvement, there cause for concern. The report shows that as a proportion of total GDP, household debt decreased from 19.2 percent in 2015 to 18.2 percent in 2016. On the other hand, household deposits to total GDP ratio declined from 8.9 percent in 2015 to 8.7 percent in 2016.