The Basics

By Tsaone Kabomo

Edited by Tshenolo Sebusang

In December 2022, the Botswana Gazette newspaper ran a publication with a front page that read “Over 2000 Batswana Imprisoned for Debt Since 2018”. Although it came as a shock to many, this is the current reality of household debt in Botswana. The issue of rising household debt has been a concern over the recent years to a point where it is getting attention of local newspapers. According to the Botswana Economic and Financial Statistics Report- 2021, as of December 2021, total household arrears stood at P2.4 billion. On the other hand, the Household Indebtedness Report (2021/2022) indicated that there were 545,316 household borrowers across all sectors. Of this, 59.7%, which translate to 325,553 households, were those who borrowed from Banks. Correlating this number with the arrears reported for the same period offers an indication of the level of consumer debt in Botswana measured in average arrears per household.

The Botswana Economic and Financial Statistics Report for April 2023 (Bank of Botswana, 2023) indicated domestic commercial banks reported P2.6 billion of loan arrears by March this year. 30% of these arrears are aged between one to three months (30–90 days), and the rest are aged 91 days plus. Consequently, P1.8 billion falls under the charged-off and bad debt categories. Simply put, Batswana are generally an overindebted nation.

For the purpose of recovery, debt is typically handled by internal debt collection departments or external debt collection professionals.  External debt collection services vary from tele- collections, the use of sheriffs of the courts to lawyers. Once debt gets to the 90 days + stage, the consumer will have an adverse record in their credit report at a credit bureau (a negative listing). Consequently, these records can stay up to 7 years in a credit bureau. For collateralized loans, if the arrears are not cleared and there is continued non-payment, assets such as vehicles and houses are repossessed. Houses that have been family homes for years are auctioned to the highest bidder! This spells financial woes for a worker somewhere, a nurse, a teacher, an accountant. Families are affected. Some people face civil imprisonment and lose their personal freedom. As an advisor on issues of personal credit and candidate debt counselor, this is what these numbers mean to me, the human impact of the aforementioned statistics.

Debt is not entirely bad. It can be good if it enhances one’s life, is affordable and is used to grow an individual’s worth (long or short term). It becomes problematic when an individual is unable to afford to service the debt incurred and ends up in arrears. While people do not envisage being adversely listed or being taken to court for failing to service debt, it happens. It can happen that one finds themselves with a little too much debt obligations on a month-to-month basis; employed or unemployed.

The question then becomes, how credit literate are we? How much do we know about the credit landscape in Botswana? What do we do when we are a little overwhelmed with a loan and credit repayments? Do we know what to do when we get that call from the sheriff or debt collector? Do we know where to seek support when feeling unfairly treated by service providers in the financial industry? Better yet, have we ever requested for our credit reports?

There are regulations in place that protect consumers as well as businesses in the credit industry. There are adjudicators who mediate cases between service providers and consumers and there are places to go when the boat shows signs of sinking. But, do we know where to start?

In the next series of articles, we will explore the basics of credit literacy in Botswana. We will consider the rights and responsibilities of a debtor/consumer through all stages of a credit cycle, the regulations as well as the regulators in the credit industry; both banking and non-banking finally we will discuss seeking help in the form of counselling.

Tsaone Kabomo is the founder of Credbase; a credit risk advisory firm. She has over 10 years of experience in the Credit Bureau industry. She completed her MBA with the University of Botswana in 2015 and her Dissertation was on Consumer attitudes towards Credit Reference Bureaus in Botswana

References

Sesupo Rantsimako .The Gazette. https://www.thegazette.news/news/over-2000-batswana-imprisoned-for-debt-since-2018/

Bank of Botswana. https://www.bankofbotswana.bw/publications/