A slower growth in credit growth towards households from commercial banks has been attributed to a significant decrease in mortgage lending.
Data provided by the Bank of Botswana (BoB) on Tuesday indicates that the financial sector recorded a downward trend on mortgage lending from a significant 40.1 percent in 2013 to 18.4 percent in 2014. Reserve Bank Governor Linah Mohohlo says in overall, credit growth rose at a slower rate of 13.5 percent in 2014 compared with the previous year’s growth rate of 15.1 percent. Household borrowing slowed sharply from 24.2 percent to 9.4 percent in 2014.
Researchers at the Bank of Botswana said last year that although in many countries mortgage lending dominates household borrowing, in Botswana the mortgage portfolio remains very low, while unsecured loans continue to dominate and record an upward trend. The downward trend, according to market observers, is a result of a combination of low salaries and absurdly high property prices due to unfriendly land policies. These are said to be the major contributors to mortgage lending being unreachable for the majority of households in Botswana.
“The sharp decline in household credit expansion augured well for the maintenance of financial stability.
Nevertheless, household debt remains a concern in an environment of slow growth in incomes. The Bank will, of course, continue to monitor household credit even though current default risk indicators provide some reassurance,” Mohohlo said.
The BoB Governor said that in contrast to household borrowing, credit to business rose markedly, from 4.6 percent year-on-year in December 2013 to 19.1 percent a year later. This rapid increase in business lending is said to have moderated the extent of the slack in non-mining GDP growth, which had slowed to 4.7 percent in the twelve months to September 2014, compared to the 5.2 percent growth rate registered a year earlier.