Saturday, January 23, 2021

More investors interested in setting up banks in Botswana

The regulator of the banking industry, Bank of Botswana, recently revealed that during the year 2013 it received 15 enquiries from potential investors who were interested in establishing banking businesses in Botswana. However, the reserve bank said none of the 15 potential investors made a formal application for a banking license, while two of the applicants who had submitted theirs in 2012 were shut out during the past financial year.

Apart from the unsuccessful two, Bank of Botswana last year licensed two banks from India, State Bank of India (Botswana) and Bank of India (Botswana), both of which started their operations last year after their successful bids in 2012. Available figures show that following the opening of State Bank of India last year, the number of banks operating in the country is now tallied at 16. All the banks are foreign owned, except three developmental banks namely, National Development Bank (NDB), Botswana Savings Bank (BSB) and Botswana Building Society (BBS) which are owned by the state.

The three developmental finance institutions represent only 8 percent of total assets whilst the largest four control around 79 percent of banking system assets, 75 percent of total loans and 83 percent of deposits. Botswana is yet to have a domicile commercial bank and attempts by local companies to go into the banking business continue to prove futile as the central bank in some instances refused to issue a banking license to such companies. The largest four foreign-owned banks are Barclays and Standard Chartered, which are subsidiaries of UK banks, and First National Bank Botswana and Stanbic, subsidiaries of South African banks. One of the leading local micro financing company, Letshego Holdings was last year barred from entering the banking sector by the central bank after its preferred banking business model was considered not suitable by the regulator. Letshego Financial Services had, in accordance with Section 61 of the Banking Act, applied to the Bank of Botswana for a licence to transact in the banking business, but the reserve bank, led by Linah Mohohlo, rejected the bid, highlighting some displeasure on the proposed banking business by Letshego.

Information passed to Sunday Standard reveals that Letshego had indicated to the central bank that it prefers to take the transactional model rather than the conventional large operation that normally includes corporate banking. Letshego’s idea was to move from the consumer lending model into a wider financial institution without necessarily hurting its current business model.

The company is counted amongst the country’s most successful micro-lenders with a loan book of over P3 billion. Although it was asked to revisit its business model, the pan African macro lender says it has put its plans to open a bank in Botswana on hold. Meanwhile BOB stated in its annual report that employment in the banking sector grew 2.9 percent to 4577 at the end of 2013 following an even faster growth of 3.4 percent in 2012.

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