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Financial system improves – BoB

SHARE   |   Monday, 04 June 2018   |   By Kabelo Adamson
BoB Governor, Moses Pelaelo addressing members of the media on Friday in Gaborone BoB Governor, Moses Pelaelo addressing members of the media on Friday in Gaborone

The local financial system is said to have improved over the years though it remains relatively small and lags behind high income countries and peers in upper middle income class.

Dr Tshokologo Kganetsano, Director of Research and Financial Stability at the Bank of Botswana, said during the 2017 economic briefing on Friday that while the local financial system has seen a notable growth over the years, more still needs to be done with a refreshed financial sector development strategy.

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Dr Kganetsano said international experience shows that the country lags behind, both in terms of financial depth and market access and has not kept pace with peers in financial innovation.

He said the financial sector development strategy should focus on factors such as accelerated integration of technology in the provision of financial services (Fintech), sustainable framework for wider coverage of long-term funding, e.g. pension funds, raise relative size of financing for mortgages, agriculture and small and medium scale enterprises by banks.

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According to Kganetsano, the financial sector contributes to the development of the economy in many ways, giving an example of commercial banks which take deposits from a lot of people and later lend money to people again to use for various purposes such as investments.

Currently the relationship between the financial sector development and economic growth is said to be positive and the financial sector is believed to be a key element in the potential success of the current Industrialisation Strategy.

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The financial sector is a broad area that covers a set of institutions and markets such as banks, insurance companies, investment funds, stock exchanges and development finance institutions.

Over the years, the banking sector, specifically commercial banks have dominated the financial sector followed by pension funds and insurance companies. Other subdivisions such as micro-lenders, statutory banks and other financial corporations constitute a smaller portion of the sector.

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The dominance of banking system by asset size has been surpassed by that of the Non-Banking Financial Institutions, supported mainly by the pension funds.

In 2017, total GDP grew by 2.4 percent compared to 4.3 percent in 2016, largely due to contraction in mining output that fell by 11.2 percent in 2017 compared to 3.5 percent the year before.

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Headline inflation in Botswana increased from 3 percent in December 2016 to 3.2 percent in December 2017, fluctuating around the lower end of the objective range, which is said to reflect restrained growth in personal incomes, subdued growth in government expenditure, modest growth in non-mining economic activity and a decrease in food inflation.



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