Tuesday, July 16, 2024

Non-performing loans record marginal rise to 3.1%

Non-performing loans in the domestic banking sector have risen to 3.1 percent by June 2014 from 3 percent in December 2013, a midterm review of the sector by the central bank has shown.

The apex bank said the banking system indicators, including low default ratios for household borrowing, suggest a stable financial environment in the domestic economy.

“The rate of household credit growth remains relatively high and continues to be monitored for its potential impact on demand, financial stability and consumer welfare,” reads the bank’s midterm review statement.

Earlier this year, a report on Botswana’s economic outlook, prepared by the African Development Bank, OECD and the United Nations Development Programme (UNDP) revealed that Botswana’s banking system is profitable and well-capitalized with a relatively low level of non-performing loans.

Previous market figures also show that the ratio of non-performing loans to gross loans declined marginally from 2.9 percent in 2011 to 2.6 percent in 2012.

However, concerns were raised about Botswana’s unsecured household debt which increased by 30 percent in 2013 and resulted in household credit, mainly unsecured debt, becoming the largest share of total commercial bank lending.

As a result, the AFDB, OECD and UNDP report stated that escalating household debt and accelerated growth of unsecured lending in Botswana’s banks are potential vulnerabilities.

“This underscores the need for the authorities to enhance surveillance to temper the rate of growth of household borrowing,” reads the report.

However, executives at the Bank of Botswana this week indicated that the current trend growth rate of credit is against the background of accommodative monetary policy and a scaling down of liquidity absorption through issuance of Bank of Botswana Certificates (BoBCs), given the need to encourage financing for viable bankable projects.

“The current profile of household debt is consistent with the stable financial sector. The Bank will continue to monitor developments to ensure that this financial stability is not undermined by potentially excessive consumer debt,” the bank said on Monday.

With its adequate capital levels, good asset quality and sufficient liquidity, Botswana’s banking sector is the backbone of the financial and business services industry.

As at September 2013, local banks’ total assets stood at P60.4 billion compared to P57.8 billion in the previous year.

The number of commercial banks in Botswana also increased from 11 to 13 following the licensing of two banks in 2013.

In the same year, banks increased their distribution channels such as branch networks, automated teller machines, points of sale machines, mobile-phone as well as internet-based banking services.


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