A Brief A Brief Overview of Overview of

Bank Credit in Bank Credit in Botswana Botswana

Keith JefferisKeith JefferisBIFM/FinMark ForumBIFM/FinMark Forum

Gaborone, October 27Gaborone, October 27thth, 2009, 2009

Total bank creditTotal bank credit

Rapid growth in bank Rapid growth in bank lending – averaging lending – averaging 16% a year over 2000-16% a year over 2000-20082008

Slowdown in 2009Slowdown in 2009 Faster growth in credit Faster growth in credit

to households (18%) to households (18%) than businesses (14%)than businesses (14%)

Household credit now Household credit now around 61% of total around 61% of total creditcredit

Bank assets vs LoansBank assets vs Loans

Bank loans have Bank loans have increased steadily, but increased steadily, but assets have increased assets have increased faster. faster.

Excess liquidity in Excess liquidity in banking system – banking system – lending not limited by lending not limited by supply of fundssupply of funds

Loan-to-deposit ratio Loan-to-deposit ratio has fallen, down to has fallen, down to 50%, compared to 71% 50%, compared to 71% in 2004in 2004

Household Credit vs Household Credit vs GDPGDP

Steady increase in the Steady increase in the ratio of household ratio of household borrowing from banks to borrowing from banks to GDPGDP

Information on household Information on household incomes not available, but incomes not available, but likely that the ratio of likely that the ratio of household borrowing to household borrowing to disposable income – a disposable income – a crucial indicator of crucial indicator of indebtedness – has also indebtedness – has also risen sharplyrisen sharply

Does not include Does not include borrowing from non-banks borrowing from non-banks (e.g. microlenders, (e.g. microlenders, Letshego)Letshego)

Credit to households Credit to households by typeby type

Most dramatic growth Most dramatic growth has been in unsecured has been in unsecured (payroll) loans(payroll) loans

No recent growth in No recent growth in vehicle loansvehicle loans

Steady growth in Steady growth in mortgagesmortgages

Shares of HH creditShares of HH credit

HH credit growth being HH credit growth being driven by unsecured driven by unsecured (payroll) credit(payroll) credit

Mortgages (property) Mortgages (property) has maintained a has maintained a constant shareconstant share

Vehicle finance has Vehicle finance has declined sharply declined sharply

HH deposits vs creditHH deposits vs credit

Over past decade Over past decade household borrowing household borrowing and deposits have and deposits have moved in tandem – net moved in tandem – net borrowing from banks borrowing from banks stablestable

In 2009 this has changed In 2009 this has changed dramatically – net dramatically – net borrowing has jumpedborrowing has jumped

Suggests HHs drawing Suggests HHs drawing on savings to maintain on savings to maintain consumption - consumption - unsustainableunsustainable

ArrearsArrears

Steady rise in arrears Steady rise in arrears levelslevels

Arrears on credit to Arrears on credit to HHs consistently HHs consistently higher than on credit higher than on credit to businessesto businesses

A further indicator of A further indicator of household income/debt household income/debt stressstress

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