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 Slowdown in 2009 Faster growth in credit to households (18%) than businesses (14%) Household credit now around 61% of total credit

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

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)

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

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

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

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

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