TransUnion sees more debt pressure on consumers

Leading consumer insights firm, TransUnion, says local borrowers are facing the heaviest debt burden in the post-Covid era, marked by reduced debt affordability, higher debt pressures, and decreased appetite for loans, due to various economic factors.

TransUnion has over 13,000 associates operating in more than 30 countries, including Botswana, Kenya, Malawi, Namibia, Rwanda, South Africa, Eswatini, and Zambia.

Kabelo Ramaselwana, country manager at TransUnion Botswana, told BusinessWeek several factors were driving the challenges consumers are facing in the credit market. These include increasing debt service ratios and inflation eroding disposable income, escalating cost of living, which limits consumers’ ability to take on additional debt as well as growing household indebtedness, particularly in areas of expensive or unsecured lending, leading to financial strain.

One indicator of the difficulties borrowers are in is the rising level of non-performing loans, as consumers struggle to manage existing credit obligations.

“In terms of severity, the challenges facing consumers in Botswana today are likely amongst the most significant in recent years, particularly when compared to pre-COVID-19 times,” Ramaselwana said.

“The combination of reduced debt affordability, higher debt pressures, and decreased debt appetite due to economic factors has created a uniquely challenging environment for consumers.”

A TransUnion survey unveiled last July estimated that 34% of local consumers were concerned about being able to meet their bills and loan obligations. The survey also found that between April and June last year, about twothirds of respondents had cut back on discretionary spending such as dining out, travel, and entertainment, while 35% cut subscriptions and memberships.

Inflation peaked at 14-year highs in 2022 and while it has been declining since then, the broader economy has underperformed with 2.7 percent growth in 2023, reflecting the strain on consumers.

“The situation facing Botswana consumers shares similarities with neighbouring regions, such as escalating household financial strain and reduced debt affordability driven by factors like inflation and rising living costs,” Ramaselwana said.

“However, Botswana may have some unique aspects, such as stringent credit policies aimed at mitigating risks associated with lending, and a notable drop in credit applications possibly influenced by interest rate changes and cautious consumer behaviour.”

Ramaselwana urged consumers to borrow responsibly and only for necessary expenses or investments and also to monitor their credit profiles. He said consumers should communicate with lenders if they are facing financial difficulties, in order to arrange suitable payment plans.

“They should also take advantage of financial literacy programmes and resources to improve their understanding of credit and financial management.

“They can also seek professional financial advice if needed to develop a personalised plan for managing debt and improving financial stability,” he

said.