Africa-Press – Botswana. Financial Stability Council (FSC) says there is more money in the Non Banking Financial Institutions (NBFIs) than in the banks and urged for tight measures to avoid financial risks, the report pointed-out.
“The NBFI sector —mainly pension funds– accounted for the largest share of financial system assets at 55.6 percent compared to 44.4 by the banking sector,” the report said.
The size of the banking and NBFI was P284 billion in 2022, up 5.5 percent from the prior year.
The report excludes the Botswana Stock Exchange’s (BSE’s) market capitalisation which is at nearly P400 billion- although the bulk of it is controlled by Anglo American Plc. “The size of the entire financial system represented 112.8 percent of GDP in December 2022, compared to 129.3 percent in 2021,” it added.
In 2022, NBFIs assets stood at P 157.9 billion while the banking sector was lagging behind at P 126 billion. The retirement funds portfolio constituted P117.9 billion followed by insurance industry at P21 billion. Other financial corporations such as Letshego Holdings had P19billion.
All banks were at P126 billion. The stake of all nine commercial banks stood at P117billion and the statutory banks constituted a tiny P9 billion. The report called for tight scrutiny of the NBFI saying it could affect the financial stability and contribute to a systematic risk.
“The insurance companies could affect financial stability and contribute to the systematic risk through three potential transmission channels, namely, failure to provide critical services; inability to mitigate risk and compensate for loss with respect to systematically important counterparts; risk to financial institutions,” it said.
“Failure by a dominant company may leave a significant gap in the provision of critical risk mitigation services to the economy as the remaining companies may not have the capacity to fill the void,” it warned.
“The dominance of BIHL (Botswana Insurance Holdings Limited) in the local sector exacerbates these risks and warrant enhanced supervision,” FSC’s report warned.
The top five largest life insurance companies in the country control 90 percent of the market share and they dominate the Gross Premiums Written. More than 80 percent of pension industry are accounted by Botswana Public Officers Pension Fund ( BPOPF).
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