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Liquidity in local banks robust – expert

SHARE   |   Tuesday, 18 September 2018   |   By Kabelo Adamson
Moody's General Manager Africa, Sylvia Chahonyo Moody's General Manager Africa, Sylvia Chahonyo

… As Moodys come to Botswana

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Generally commercial banks in Africa are said to have a stable outlook with the rebounding of commodity prices believed to be supportive of liquidity in the banking system.

On Friday rating agency in collaboration with Botswana Stock Exchange (BSE) hosted a half day roundtable where professionals from other institutions were invited to discuss different topics affecting the continent, Botswana included.

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Presenting on the views of the banking system, Vice President – Senior Credit Officer at the Financial Institutions Group, Akin Majekodunmi, said Botswana has one of the highest sovereign ratings in the region.

He said credit trends in Botswana shows that Non-Performing Loans (NPL) ratio is quite low when compared with other countries in the continent.

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“Banks in Botswana have amongst the lowest reported NPLs loan ration,” said the Senior Credit officer, explaining that diversity within the loan portfolio is contributing towards this when compared with other countries such a Nigeria with high corporate loans which he said tend to be volatile.

In addition, Majekodunmi said banks in Botswana have the highest reported capital ratio adequacy in Africa, adding that banks here also report profitability in line with South African ones.

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According to Majekodunmi, liquidity in the local banking system is quite robust and liquidity over the past years, except in 2015, has been above the required 10 percent stipulated by the regulator which is supposed to be liquid assets.

On another topic of infrastructure as an asset class, Christopher Bredholt – Senior Credit Officer for Project and Infrastructure Finance Group – said provision of infrastructure in Botswana and the whole continent is still dominated by government, meaning opportunities for cooperation between government and the private sector exist.

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He said in Botswana government has identified areas of water, energy security and clean environment for infrastructure funding.

Moody’s credit rating agency had collaborated with the BSE also to talk about the benefits of rating by agencies such as Moody’s. Currently Moody’s rates only two organisations in Botswana, which are Letshego and Botswana Development Cooperation (BDC).

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Moody’s General Manager Africa, Sylvia Chahonyo, has not ruled out the possibility of carrying out ratings on other corporations locally in the future. Moody’s credit ratings are forward-looking and use different methodologies to come up with ratings.

Ratings, Chahonyo said, has a lot of benefits such as wider access to the capital market which result in the company being able to diversify its investments. The other benefit is that rating also brings tangible financial benefits as the more the people know about an organisation, the less they think of the risks.

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Rating in addition brings increased market stability and Chahonyo explained that their ratings and research reports help to maintain investor confidence.



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