Tuesday, November 28, 2023

Top banker cautions on muted credit extension in Botswana

The year 2020 was not as chaotic for the country’s banking sector and was nothing closer to a roller-coaster ride as many may have thought, atleast based on the numbers shared by the central bank earlier this year.

The official statistics shows that it was in 2020 that big and small banks alike witnessed a shrink in the size of their bad loans. According to the Bank of Botswana’s 2021 Monetary Policy Statement Policy – which gave an update on the performance of the country’s banking sector in 2020, commercial banks maintained good quality assets with a decline in credit default rates.

The central bank’s figures shows that the ratio of non-performing loans (NPLs) to total credit was 4.3 percent in December 2020, compared to 4.9 percent in December 2019.

But now one of the country’s leading banker – First National Bank Botswana (FNBB) has warned that the honeymoon could be over for the banking sector.

FNBB published its financial statements for the year ended June 2021 this past week which shows that it continues to apply a prudent approach to lending.

The approach has resulted in a decline in gross customer advances by 7 percent, while market gross advances increased by 4 percent.

Along its economic commentary, the bank cautions that the global and regional uncertainty may, as a result, translate into the continuation of muted credit extension within the country.

The FNBB caution comes at a time when the Covid-19 pandemic has made the banking sector overly cautious when it comes to lending. Most banks, if not all anticipate a downward pressure on customer risk profiles and realisable collateral values in the overall context of the pandemic.

“The Botswana economy has continued in a pattern of soft economic downturn since the onset of the COVID-19 pandemic. Activity across major sectors is taking up at a slower pace following the lifting of some COVID-19 restrictions and this is expected to be uneven”, reads part of the FNBB economic commentary published this past week.

FNBB says while Botswana remains exposed to external disruption from the pandemic, the pace of local vaccinations against Covid-19 will largely determine the rate of recovery in normal business operations. The bank projects that the local economy will rebound above the 6 percent levels in 2021, hinging mainly on the continued medium-term recovery in global diamond sales and increased production levels over the second half of the year.


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