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Botswana’s financial system needs restructuring - Gaolathe

Publishing Date : 10 September, 2018


For a country celebrated for its prudent economic policy, Botswana’s dependence on foreign multi-national banks as financial intermediaries in its economic system is a signal of weakness in the economic structure or political economy, Gaborone Bonnington South legislator, Ndaba Gaolathe has said.

Gaolathe, who is also the leader of Alliance for Progressives (AP), told this publication that despite some successes of Botswana’s financial sector, Botswana continue to face major challenges within the sector. “The main challenge is that most of the rural population, especially the rural poor remain unbanked and are without access to financial services in general,” he said.  “Access to credit is also a significant impediment to the development of SMEs in general, although it is also noteworthy that management capacity is at least as important.”  

Gaolathe contended that the banking service charges reveal competitive failures and the overall risk analysis capacity of banking system is not adequate for the efficient development of the economy in general. “These factors point to a dire need to restructure the financial services sectors in order to enable or pave way for an enabling environment for the banking/financial services sector,” he said.  

Gaolathe, an Economist by training, is of the view that Botswana is desirous of a financial sector that exhibits a number of characteristics, among others; establishment of indigenous financial institutions, with broad-based ownership by citizens; enhanced access to financial services and credit by the majority of the people including rural households including low income groups; robust competition within the financial sector to fertilize modern, diverse and competitively priced services including access to credit, conducive to stronger economic growth as well as a better graduation of lower financial service providers to second and first tier banking.

“Our position has been that the Botswana’s banking laws are excessively stringent and create immensely high barriers that preclude Botswana from achieving the type of financial services environment that is desirable,” he said. “In fact, this stringency of our archaic banking laws is the main cause for the depravations in our financial/banking system,” he argued. Gaolathe indicated that there is a fundamental need to change our banking laws, with certain goal posts in mind. “One of the things we need to do is to provide a regulatory framework that is tiered, if you like, into several tiers,” he suggested.  

“That regulatory framework should provide for microfinance institutions, rural/village banks, stockvels, burial societies, cooperatives as well as other membership-based credit or savings unions.”  He said such a framework should aggressively facilitate the entry of small niche banks, and of other deposit-taking credit institutions.  “This should entail the lowering in some cases of capitalization requirements, and of branch network requirements,” he added. “Requirements should not focus on banking experience of the institution but on the collective expertise and experience of personnel involved.”  

Gaolathe noted that apart from the law or regulatory framework, it is necessary to devise policy to enhance the capacity of self-regulatory associations that coordinate or oversee the various players in these financial sub-sectors. He said such policy instruments should include direct financing of these associations and providing incentives for first tier players to take interest in participating in the larger ecosystem that promotes players in the lower tiers.



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