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Personal loans constitute the largest debt that Batswana hold with local commercial banks, according to the data from the Bank of Botswana.
At P37 billion, personal loans are more than twice the next highest form of debt Batswana hold, which is property at P14 billion, followed by motor vehicle and credit card debt at P2.5 billion and P796 million, respectively.
Personal loans have seen the most growth since 2017, followed by property, motor vehicle and then credit card debt. Meanwhile, total household debt has increased from P33 billion in 2017 to P55 billion in 2024, an
Although debt is not always a vice as it is supportive of economic growth and development mainly through consumption spending and acquisition of high value assets such as property, as well as other income-generating assets, the Bank of Botswana indicates that financial risks may increase when increasingly high rates of household credit growth are either unsupported by a commensurate increase in personal incomes or fail to generate sufficient wealth.
In Botswana, the debt-to-income ratio has generally trended upwards, a situation which shows increasing pressures on household incomes from debt. The trend changed in 2022, which the bank attributes to a combination of tighter financial conditions amid price pressures because of the consequences of the Russia-Ukraine war, geopolitical tensions and higher maximum earnings.
The Bank of Botswana further states that households in Botswana may be financially constrained to the point of being indifferent to an increase in the cost of borrowing. This suggests that even when interest rates increase, households continue to demand more credit, reflecting a disregard for borrowing costs despite potential financial strain.
"It is, therefore, crucial to regulate the credit availed to households in relation to their incomes (debt-to-income ratio) to mitigate potential debt distress. Such regulation would help restore the potency of interest rates in influencing demand for credit, ensuring that borrowing is for convenience rather than to address financial distress," the central bank said in its February research bulletin.