Enhancing access to banking and financial services in Botswana

The banking sector plays a crucial role in any economy through the provision of financial intermediation and payments services. Through these services, banks enable the efficient allocation of savings and investment, and enable financial transactions to take place at minimum cost. In discharging these functions, Botswana’s banking sector has many strengths: it is reasonably efficient, it is sound and profitable, has never experienced any serious banking crises, and on the few occasions that financial institutions have experienced problems that threaten their continued existence, these problems have been dealt with quickly and without any negative impact on the financial system as a whole. The high quality of banking regulation and supervision in Botswana is internationally recognised, and in recent years there have been a number of product innovations and improvements in service quality.

Nevertheless, banks in Botswana – as in most countries – are frequently the subject of negative comments and criticism. Among the major concerns are high charges, long queues, a lack of services in rural areas, and more generally perceptions of only serving a small minority of the population. Some of the criticism is misplaced, and there is evidence that the banks have tried to address at least some of these concerns.

However, the issue of access to banking and financial services is of crucial importance. In Botswana, as in most developing economies, the banks dominate the financial system. As the dominant financial institutions, banks need to be cognisant of their role as important agents of economic development, and not confine themselves to a narrow range of activities or customers, especially given the very high rates of profit earned by banks in Botswana. There is widespread evidence and experience showing that broadening access to financial products and services has benefits for both individuals and business, and for the economy as a whole. Access to savings products, credit, and transaction services enables people and businesses to accumulate financial assets, invest, spread risks, and make payments cheaply and efficiently. There are well-established links between the size and scope of the financial system and the rate of economic growth. Furthermore, ensuring that access to finance is widespread can have benefits in terms of poverty reduction and income distribution, and there are many benefits that can flow from overcoming the obstacles and reducing the high costs that the poor often face in gaining access to financial products and services.

The recent focus of many development efforts has been on ‘Making Markets Work for the Poor’, sometimes termed ‘MMW4P’. I am pleased to note that among the pioneers of MMW4P in the financial sector is FinMark Trust, an organisation based in South Africa that is active across Southern Africa. In recent years, FinMark has carried out a number of activities in Botswana. These include ‘FinScopeTM’, a nationwide survey of access to and usage of financial services, and of perceptions about financial products and institutions, relating these to the socio-economic and demographic characteristics of the population. In collaboration with Botswana Insurance Fund Management (BIFM), FinMark has also sponsored a series of regular Forums in Botswana, which bring together practitioners, academics and policymakers to discuss topical issues relating to enhancing access to finance.