Botswana’s households and businesses are finding it increasingly difficult to manage their debt obligations, with loan arrears sharply on the rise. Recent data from the commercial banking sector reveals a concerning trend: a P480 million surge in arrears, climbing from P5.637 billion in January 2025 to a substantial P6.117 billion by the end of February 2025.
The latest financial figures released by the banking sector last week paint a detailed picture of this growing financial strain. For February 2025, households reported P3.57 billion in loan arrears, a notable P280 million increase compared to the P3.29 billion recorded in January 2025. The business sector wasn’t far behind, reporting P2.53 billion in arrears, up by P200 million from the previous month’s P2.33 billion. Even the government experienced a slight uptick in arrears, rising by P200 thousand from P14.1 million to P14.3 million during the same period.
Delving deeper into the household sector, the data reveals that loans overdue for 30-90 days reached P1.1 billion in February 2025, a significant jump from P844.9 million in January 2025. While loans overdue for 90-180 days saw a slight decrease (from P755.9 million to P746.2 million), those overdue for more than 180 days continued to climb, increasing from P879.2 million to P957.3 million.
The business sector also faced its share of challenges. Arrears for 30-90 days in February 2025 stood at P716.4 million, considerably higher than the P477.3 million recorded in January 2025. Loans overdue for 90-180 days amounted to P210.4 million, a decrease from P234.9 million in January 2025, while those overdue for over 180 days hovered around P1 billion. Within the business category, the trade sector recorded the highest loan arrears, totaling P620.3 million, followed by real estate (P240.1 million), construction (P220.3 million), manufacturing (P166.9 million), and agriculture (P143.2 million).
Despite the rising tide of arrears, commercial banks continued to extend credit to both households and businesses. Total credit extended by commercial banks rose by 0.5 percent (P398 million) between January 2025 and February 2025, from P87.2 billion to approximately P87.6 billion.
Households accounted for 64.3 percent of total credit in February 2025, slightly higher than the 64 percent recorded in January 2025. Annual growth in household credit remained steady at 5.5 percent in February 2025, the same as in February 2024. However, a closer look reveals shifts in lending patterns within the household sector. Lending for motor vehicle acquisition decreased (from 9.7 percent to 7.9 percent), as did property loans (from 8.5 percent to 0.01 percent) and credit card-based loans (from 2.3 percent to -2.1 percent). Conversely, the growth of personal loans increased from 4.2 percent to 7.8 percent, spurred by the cumulative 75 basis points decrease in the Monetary Policy Rate (MoPR) since December 2023.
On a yearly basis, commercial bank credit growth decelerated from 8 percent in February 2024 to 5.9 percent in February 2025. According to the Bank of Botswana, this slowdown is “largely attributable to a lower utilization of overdraft and revolving credit facilities by businesses.”
The credit-to-GDP gap, a key indicator of credit-related vulnerabilities, remained negative (-2.8 percent) in December 2024. The Bank of Botswana noted that this figure is “well below the threshold of a positive 10 percent, indicating limited risks of credit growth that could overheat the economy.” However, the Bank also cautioned that “developments on credit growth yielded a downward trend, despite an accommodative monetary policy stance, possibly reflecting the timid demand for credit in an environment of tepid economic activity.”
