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A Brief Overview of Bank Credit in Botswana

A Brief Overview of Bank Credit in Botswana . Keith Jefferis BIFM/ FinMark Forum Gaborone, October 27 th , 2009. Total bank credit. Rapid growth in bank lending – averaging 16% a year over 2000-2008 Slowdown in 2009 Faster growth in credit to households (18%) than businesses (14%)

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A Brief Overview of Bank Credit in Botswana

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  1. A Brief Overview of Bank Credit in Botswana Keith Jefferis BIFM/FinMark Forum Gaborone, October 27th, 2009

  2. Total bank credit • Rapid growth in bank lending – averaging 16% a year over 2000-2008 • Slowdown in 2009 • Faster growth in credit to households (18%) than businesses (14%) • Household credit now around 61% of total credit

  3. Bank assets vs Loans • Bank loans have increased steadily, but assets have increased faster. • Excess liquidity in banking system – lending not limited by supply of funds • Loan-to-deposit ratio has fallen, down to 50%, compared to 71% in 2004

  4. Household Credit vs GDP • Steady increase in the ratio of household borrowing from banks to GDP • Information on household incomes not available, but likely that the ratio of household borrowing to disposable income – a crucial indicator of indebtedness – has also risen sharply • Does not include borrowing from non-banks (e.g. microlenders, Letshego)

  5. Credit to households by type • Most dramatic growth has been in unsecured (payroll) loans • No recent growth in vehicle loans • Steady growth in mortgages

  6. Shares of HH credit • HH credit growth being driven by unsecured (payroll) credit • Mortgages (property) has maintained a constant share • Vehicle finance has declined sharply

  7. HH deposits vs credit • Over past decade household borrowing and deposits have moved in tandem – net borrowing from banks stable • In 2009 this has changed dramatically – net borrowing has jumped • Suggests HHs drawing on savings to maintain consumption - unsustainable

  8. Arrears • Steady rise in arrears levels • Arrears on credit to HHs consistently higher than on credit to businesses • A further indicator of household income/debt stress

  9. Thank You

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