Tuesday, November 28, 2023

In Botswana, financial inclusion is still a dream…

International experience shows that Botswana lags behind in several respects including financial institutions and market depth, financial access and size relative the economy, a research conducted by the central bank ÔÇô Bank of Botswana has shown.

Through its annual report (2017), the central bank, which is headed by Governor Moses Pelaelo, has discovered that Botswana has also not kept pace with peers in financial derivatives that are important in risk management as well as in harnessing financial technology to reap maximum benefits.

The bank also stated in the report that in order for Botswana to realise the full benefits of financial sector development, appropriate financial sector policies should be formulated and implemented, focusing on promotion of a conducive operating environment, sound regulatory and supervisory frameworks, fostering the development of financial markets and broadening financial inclusion.


While financial inclusion may sound like an esoteric concept, its meaning is more than real for 64 percent of the population in rural areas in Botswana which has access to formal financial products and services.

Financial inclusion is one of Africa’s great success stories of this decade. Mobile money solutions and agent banking now offer affordable, instant, and reliable transactions, savings, credit, and even insurance opportunities in rural villages and urban neighbourhoods where no bank had ever established a branch. Can Botswana be counted amongst the advanced nations when it comes to financial sector development? The Bank of Botswana says the answer to the question is both yes and no.

Dr Tshokologo Kganetso, head of the Research and Financial Stability at Bank of Botswana says Botswana has long recognised the importance of financial sector development in pursuit of deep financial markets, sustainable and inclusive economic growth.

The central bank says against this backdrop, the evolution of the financial sector in Botswana has been guided by deliberate policy formulation, advancement in financial technology, evolving user needs in the economy as well as adoption of international standards and best practice.

The bank list introduction of market instruments such as Bank of Botswana Certificates and government securities amongst the country’s key achievements.

With respect to legislation, there have been several enactments which resulted in regulatory authorities such as the Non Banking Regulatory Authority (NBFIRA), and the Financial Intelligence Authority (FIA). NBFIRA has a regulatory oversight of non banking institutions such insurance companies, asset management companies and micro lenders while FIA’s main role is to combat financial offences.

“The country has adopted various financial sector development strategies that sought to promote development of different aspects of the financial system including financial markets and instruments, competition and adequate supervisory frameworks for all financial institutions”, reads part of the BOB report.


Despite the changes in legislation, the BOB data shows that Botswana generally lags behind high income countries and its Upper Middle Income Countries (UMIC) peers on access to both financial institutions and financial markets. The BOB research department says only 64 percent of the population in rural areas in Botswana have access to formal financial products and services compared to 90 percent and 81 percent in Mauritius and South Africa respectively.

At the same time, official figures show that the proportion of households with no access to any form of financial services declined from 31 percent in 2009 to 24 percent in 2014. The figures also indicate that the proportion of households with access to formal banking increased from 45 percent to 50 percent driven by the increase in mobile and internet banking and payments channels.

BOB executives says though Botswana lags behind high income countries and its UMIC peers, access of Botswana’s population to financial services has improved over the years.


Dr Kganetso says while the positive correlation between financial sector development and economic activity is evident, “financial services in Botswana, although growing, remain relatively low to overall output and in comparison with other countries”.

The BOB head of research says there are atleast five areas that can be highlighted that represent opportunities for Botswana to address existing needs, inclusive growth and innovative expansion of the financial sector. Dr Kganetso says these include increasing the size of mortgages in the balance sheet of banks and relative to GDP, enhancing productivity of resources flowing into the agriculture sector, expansion of support for the Small and Medium scale enterprises, effective packaging and harnessing of resources for long term project funding and accelerated integration of technology in the provision of financial services.

While the central bank think tanks have suggested mobilisation of resources that encompasses stable and sustainable resources flowing to the government as part of the solution, Albert Gaopelo says financial literacy occupies a centre-stage in the quest to achieve financial inclusion, financial stability, economic growth and development.

Gaopelo is the founding Chairperson of the Botswana Organisation of Financial Literacy (BOFILI) – a newly established non profit making organisation dedicated to financial literacy in Botswana. The NGO is set to be launched in Boteti district in July 2018.

“Inclusive growth in the economy can only be achieved where a larger proportion of the population participates in financial markets”, says Gaopelo.


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