Better data insights will drive Botswana’s credit industry forward

Banks and lenders in Botswana can lower their lending risks, reduce non-performing loans and extend credit more effectively to all citizens if they improve their compliance and data-sharing practices. This will ultimately improve financial inclusion and give consumers access to better credit services.

The need for better data quality and risk-based solutions across the financial services sector was the focus of a workshop attended by some of the country’s most senior banking and risk professionals in Gaborone on Thursday, 28^th November 2019. The workshop, which was being hosted by global risk and information solutions provider TransUnion Africa, aimed to help local banks and lenders protect their profitability while promoting responsible lending.

Kabelo Ramaselwana, TransUnion’s acting country manager for Botswana, said it was critical for banks and lenders to understand their customers when it came to making the right decisions and ensuring their profitability.

“The use of data to make credit decisions in Botswana is still fairly low, by global standards. By using data-driven insights, businesses can get a comprehensive view of consumers and have the information they need to make more confident decisions and better manage risk and relationships throughout the customer credit life cycle,” said Ramaselwana.

As at December 2018, there were 277,762 household borrowers in Botswana, with a total of P33.1bn of loans extended by commercial banks. Unsecured personal loans now make up 67% of the balance of all household borrowings in the country, with a further 27% being mortgages and 6% motor vehicle loans. This reflects a significant shift in the composition of household debt over the past two decades: in December 2000, unsecured personal loans made up only 45% of the balance of household borrowings.

Ramaselwana said average annual cash earnings in Botswana had increased by 5.1% over the decade up to 2017, compared to an inflation average of 6%. This was putting growing pressure on disposable income levels for households, making it increasingly important for banks and lenders to make the right lending decisions to drive greater financial inclusion and financial wellness.

TransUnion Africa’s Chad Reimers, who is responsible for the company’s African operations outside South Africa, said the company was continually seeking to engage local banks, lenders and businesses to improve the quality of data.

“Inconsistent data quality means that the industry as a whole is at a disadvantage when it comes to making decisions. This leads to greater risk in decision-making, which leads to increased cost of credit as providers price for this risk. By getting access to more comprehensive data and better insights, businesses can better understand consumers, and thus provide better services and offerings,” said Reimers.

“This will have a significant impact on the ability of consumers to access financial services to help achieve their personal objectives, whether purchasing a house, or funding their education goals.”