Keith Jefferis, chairman of Bifm’s Investment board, has ruled-out the possibility of a sub-prime mortgage crunch taking place in Botswana saying all the mortgage lenders in the country are financially sound.
The move comes as a result of the financial melt-down ravaging the United States of America, Europe and Asia sparked by sub-prime lending that originated across the Atlantic Ocean.
Last week, financial analysts warned the international markets that the economic emperor across still has not put his clothes on which might lead to a continued international financial turbulence.
“The mortgage lending in Botswana is composed of commercial banks and the BBS (Botswana Building Society) and all of them are operating on very conservative principles,” Jefferis told a Bifm stakeholders conference last week.
“In Botswana, we have a prime lending mortgage while in the United States they were raising money on the wholesale market. But here the situation is that they lend based on money on their balance-sheet,” he added.
International financial analysts and the Bank of England stated that the sub prime mortgage crisis is not yet over, adding that they are expected to impact on corporate earnings during the current quarter.
“Sub-prime issues are not over and we are still going to see some earning pressures on some corporate earning. We see less growth in the USA going forward,” Colin Graham, head of equities and alternative investment at London-based BlackRock, told the conference in Gabion on Tuesday.
“The US is no longer a buy and hold market and we believe that the world has changed now,” he said, adding that they expect corporate earnings to slow.
The concerns over the USA economy were also raised by the Bank of England on Thursday saying the impact of the credit crunch is not yet over.
The sub-prime mortgage crisis was largely prompted by financial institutionsÔÇöbanksÔÇö which were lending to clients who were not credit worthy. The banks shares were sold in Asia, Europe and USA as securities instruments following high ratings from credit rating agencies but when interest rates were adjusted upwards most of their clients, who were not credit worthy, defaulted on their loan sparking the biggest financial crisis since September 11, 2001 when al-Qa’eda terrorists attacked New York and Washington.
The move hurts the USA housing market which has been the driving force of that country’s economy since 2001.
“Sub-prime mortgaging lending institutions were lending to people who were not credit worthy. They allowed people to exaggerate their earnings but I do not see that happening here because our banks do a thorough scrutiny before lending out,” Jefferis added.