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IFC funds BBS expansion with over P250 million

Publishing Date : 19 December, 2017

Author : REARABILWE RAMAPHANE

Home grown financial institution, Botswana Building Society (BBS) which is on process to becoming the country’s first indigenous bank, has secured a loan amounting to over 250 million pula from the International Finance Corporation (IFC) to finance its expansion into financial inclusion products.


According to a statement from the institution dated 13th November, the IFC which is the sister company to World Bank under the World Bank Group will use its debut Kgalagadi Bond to finance the $25 million investment. It is expected that the support will enable the BBS to promote its financial inclusion quest and access to housing finance in Botswana. BBS is a traditional financing partner to ordinary and middle income earning Batswana with products tailored for low earning households and informal small entrepreneurs.


The investment   comprises of a senior loan equivalent to $25 million in local currency. As Botswana Building Society demutualizes into a private holding company by shares, the long-term funding will support the transformation of the Society into a full-service commercial bank to enable change of business model to best suit underserved clients, including small and medium enterprises.


According to IFC the Kgalagadi Bond is the first local currency bond issued by a non-resident issuer in Botswana and also the first by a AAA rated institution in the country. “This is the first amortizing bond in the market, and forms part of the IFC Pan African Domestic Medium Term Note Program,” said Director of Treasury Client Solutions at the IFC, Mr. Keshav Gaur at the Bond listing in Gaborone this Wednesday


The Society prides itself in being the leading domestically owned financial institution and the largest residential mortgage lender in Botswana. In its transformation the Pius Molefhe led institution, will ensure that the envisaged bank enhances both its financial inclusion and housing finance initiatives and help it to compete more effectively against other larger local commercial banks in Botswana.


“The IFC investment will help to strengthen BBS’s financial stability and assist the demutualised Society to introduce new products and services for under-served market segments, including Small and Medium Enterprises,” states the press statement. According to Pius Molefe, Managing Director of Botswana Building Society the IFC support couldn’t have come at the right time. He highlighted the crucial importance of such resources as the society moves to be the first home grown commercial bank in Botswana. “We welcome IFC’s support to our transformation strategy. The financing will enable us to offer conventional banking products at more competitive rates, making us a stronger player in the market,” he said.


Oumar Seydi, IFC Regional Director for Africa reiterated that his corporation supported clients by mobilizing private capital to create, deepen and expand markets. “Financial inclusion and growing SMEs are a key focus of IFC interventions, job creation and their significant impact in reshaping markets.” 


“IFC financing to Botswana Building Society will improve access to finance for job-creating for small and medium enterprises. The bond issuance will mobilize long-term funds in the capital market and channel them to BBS, consistent with our strategy to create markets that promote growth,” he added.


The executives of the IFC and the BBS underscored that their organizations recognized home ownership as a key source of wealth creation for low and medium income earners, noting that in Sub-Saharan Africa access to mortgages and other forms of financing for purchasing homes was limited. In Botswana, only two percent of the population has used housing finance, as most households still use non-mortgage credit.


IFC is providing long-term funding and eliminating obstacles to the development of an enabling environment for affordable housing by supporting mortgage refinancing companies across the continent. The International Finance Corporation head quartered in Washington DC, United State is a sister organization of the World Bank and a member of the World Bank Group. It is the largest global development institution focused on the private sector in emerging markets. Latest figures show that the company delivered a record of $19.3 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity


The BBS’s demutualization was given the green light by the society members in August this year. The management, led by Molefe was authorized to transform the organization into Botswana’s first home grown commercial bank. It is expected that BBS will, after fully transforming into a private shareholder held company, list on the Botswana Stock Exchange.  Established on the 13th of December 1976 the society has grown tremendously to become an indigenous household name for financial services especially amongst low and middle income Batswana.


The exceptional growth of the Society over the past 41 years can best be measured by the phenomenal increase in its reserves, from only P2, 100 in March 1977 to just under P203 million in March 2012. The Statutory reserve alone increased from a mere P200 to almost P2, 460 billion over this period. If funding from key financial institutions like IFC, the demutualization looks set and the Pius Molefe lead team is ready to make history. BBS is expected to be a commercial bank by the first quarter of 2018.

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