Household credit concentrated in unsecured lending

Household credit grew by 6.3 percent in the twelve months to March 2021, lower than the 15.1 percent growth recorded in March 2020. According to Bank of Botswana Financial Stability report, credit to households continued to dominate total commercial bank credit, at P43.3 billion ( 66 percent) in March 2021, and was mostly concentrated in unsecured lending at 71.8 percent.

“The proportion of unsecured loans to total credit remains higher than the 24.4 percent and 35.4 percent reported in South Africa and Mauritius, respectively.” The report stated that the significant share of unsecured loans and advances has the potential to cause financial distress for households, given the inherently expensive and short- term nature of such credit.

“Therefore, households remain vulnerable to sudden and sharp tightening of financial conditions.”