Individual bank loan arrears drop to P2.8bn
Loan arrears owed by individual customers to the country’s commercial banks slowed to P2.77 billion in September, easing from highs seen earlier in the year as borrowers struggled to honour debt commitments due to the coronavirus (COVID-19) impact.
According to Bank of Botswana (BoB) figures released this week, as at the end of September, the arrears owed from loans to individuals were down from P3.01 billion in August and P3.1 billion in July.
During the period between April, May and June, when the coronavirus (COVID-19) impact fully hit household, loan arrears averaged P3.2 billion.
Borrowers battled to fulfil their loan commitments as companies cut salaries and took up the wage subsidy, while the banks offered a three-month loan repayment holiday ending in June. The central bank figures show that while the arrears fell to P2.77 billion in September, nearly 33% or P901 million of that figure was classified as “specific provisions’ or the worst type of loan arrear which is more than 180 days past due.
However, the specific provision figure is an improvement from P971.1 million in August and P1 billion in July.
In September, the Financial Stability Council, which comprises senior officials of the Ministry of Finance and Economic Development, the BoB, Non-Bank Financial Institutions Regulatory Authority and Financial Intelligence Agency, said the banking sector had maintained a low level of non-performing loans despite the COVID-19 crisis.
The council, however, noted that problems could arise if the pandemic lasted longer.
“The Council observed that the COVID-19 pandemic and the necessary disease containment measures will continue to have an adverse effect on economic performance in the short term and could, if protracted, further elevate risks to financial stability in particular potential increase in default of bank loans and insurance premiums payments or contributions to pension funds, as well as, early pension withdrawals emanating from loss of employment. “The pandemic, if protracted, could elevate risks of constrained liquidity for some institutions, which were not able to underwrite new business during lockdowns, as well as, lower profits and investment returns.”