The Governor of the Bank of Botswana (BoB), Linah Mohohlo, has praised the growth and deepening of the country’s banking sector industry for the last 15 years of her leadership as the Central Bank head.
Speaking at the gala dinner for Botswana Institute of Bankers on Thursday, she said that when considering the performance of the banking sector in the context of the basic benchmarks, the extent of its growing importance in the domestic economy is abundantly clear.
She revealed that commercial banks’ assets have risen by almost 180 percent. ┬áMohohlo added that the growth of loans, at about 290 percent in real terms, is even more pronounced, compared to an increase of 190 percent for deposits.┬á
“These rates of growth are more than twice as fast as overall economic expansion, which means that there has been a significant improvement in financial deepening.┬á In contrast, banknotes and coin in circulation, again adjusted for inflation, grew by a relatively modest 47 percent,” said Mohohlo.
She pointed out that it also reflects the development of banking in Botswana, as non-cash means of payment are more widely used. She added that various forms of electronic payments that are suitable for both large and small transactions have grown rapidly in importance.
Mohohlo also pointed out that as a result, the contribution of the banking sector to the country’s GDP increased markedly, from 2.2 percent in 1998 to approximately four percent in 2012. She added that it may not sound like much, but the fact is that banking is now one of the largest sub-sectors in the economy, outside mining and government.
“One good result of the increasing number of banks is that it has stimulated the much-needed boost to competition. This is indicated by the range of products now available and the expanding branch network. The traditional dominance of large banks is being progressively eroded and the new generation of “small” banks is making impressive gains in market share,” she said.
Mohohlo said that the Bank of Botswana has been complementing the developments in more ways than one, some of more consequence than others. She added that all of which have helped shape the development of the banking sector.
She also pointed out that they include the steps undertaken to ensure that Bank of Botswana Certificates remain a tool for bona fide liquidity absorption. ┬á
“There has also been the capping of the upper limit for cheques; there are guidelines on maintaining deposit interest rates at reasonable levels and retail banking services that were provided by the Bank of Botswana were terminated,” she stated.
She observed that competition among banks has become more intense in a number of respects, and with demonstrable benefits for customers. Mohohlo stated that yet the complaint that banks charge rather highly for poorly delivered services continues to resonate, seemingly undimmed from fifteen years ago. ┬áShe added that in part, it may reflect higher standards required by modern-day customers.
She also revealed that independent surveys have shown that Botswana ranks relatively well in Africa in terms of financial access, especially in terms of access to banking products.
“This is a notable achievement of which we should be proud. But, as banking increasingly becomes regarded as a mainstream service, rather than one reserved for a privileged minority,” she said.
The Governor stated that the questions as to why a substantial proportion of the people do not yet have access become more pointed. She added that it is incumbent on all the players in the banking community, as well as the regulator, to work constructively to advance this important agenda.
“We can look back with pride, both individually and collectively, to the achievements of the past fifteen years. These have been evident in a range of areas with clear benefits to the economy as a whole,” said Mohohlo.