Africa-Press – Botswana. The Bank of Botswana’s (BoB) Financial Stability Report dated May 2025 shows personal loans driving growth while mortgage lags persiste.
Household borrowing in Botswana expanded by 6.2 percent year-on-year in March 2025, propelled mainly by personal loans.
According to the Bank of Botswana’s (BoB) Financial Stability Report dated May 2025, personal or unsecured facilities added 4.2 percentage points to overall household-debt growth, with the balance coming from other loan categories.
Personal loans fuel growth
The report noted that motor-vehicle finance and personal credit “were the significant drivers of growth in credit to households”. Unsecured loans now account for 69.4 percent of household credit.
“The more expensive unsecured loans continue to dominate household credit… presenting a potential channel of debt distress in the event of loss of employment or a sudden tightening of borrowing conditions,” the report cautioned.
Most borrowing is by public-sector employees on deduction-from-source schemes, a structure that historically improves repayment.
Repayment risk flagged
However, “failure by government to process timely third-party payments amid growing fiscal pressures could disrupt banks’ day-to-day operations, including liquidity management,” the report warned.
The dominance of unsecured loans therefore “presents growing structural vulnerabilities with potential to amplify credit losses in case of insurmountable fiscal strain”.
Despite the rise in debt, households remain net savers when long-term pension assets are included. Estimated household net worth climbed to 56 percent of GDP in the fourth quarter of 2024, up from 51.4 percent a year earlier.
Pension balances also offer relief to mortgage holders under the Retirement Funds Act 2022 and “improve the long-term financial welfare of households,” BoB noted.
Commercial real estate cools
Credit to commercial real estate slipped to P5.8 billion in February 2025 from P6.1 billion a year earlier, representing 6.7 percent of total loans.
Non-performing loans in the sector stood at a modest 1.4 percent at end-2024, suggesting limited systemic risk, although BoB highlighted “concentration risk” because most properties financed are in or near Gaborone.
Residential mortgage lending held steady at P14.8 billion between February 2024 and February 2025, equal to 26.3 percent of total credit. By comparison, mortgages comprise 61 percent of household loans in South Africa and 70 percent in Namibia.
Mortgage gaps
The relatively low share “suggests that the level of domestic housing finance is not commensurate with the needed development path,” the report said, adding that subdued income growth and rising house prices point to constrained affordability.
The central bank said the current environment of “growing fiscal pressures” complicates expected-credit-loss modelling for lenders and could test banks’ liquidity buffers if public-sector cash-flow issues persist.
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