Business

Banks urged to support SMEs

Bank of Botswana (BoB) governor, Linah Mohohlo said there must be more activity in the direction of ensuring that the financial system is fit for the 21st century through sustainable finance. “We want to see a visible helping hand by banks in, among others, providing business counselling services to nurture small and medium sized businesses,” she said.

The SME sector accounts for almost 90 percent of registered businesses in Botswana.

The governor also noted that more capital market instruments needed to be developed including issuance of private sector bonds and other tradable debt instruments of a spectrum of maturities. She was presenting on the growth and successes of Botswana’s financial systems and its role to contribute to the country’s sustainable development, at a high level national symposium on sustainable finance that was held in Gaborone last week.

“The achievement of sustainable development requires the contribution of a financial system fit for the 21st century that can promote business success and national resilience by providing sustainable finance,” said Mohohlo. 

She further said the importance of financial institutions in promoting economic diversification in small and medium size middle-income countries was stressed at the international conference jointly hosted by BoB and the International Monetary Fund (IMF) in January this year.

She said it is also the case that banks are yet to tap fully into opportunities for financing small and medium-scale businesses that can add value to some of the country’s rich natural resources with the possibility of developing traditional pharmacological products and tourism-related activities.

According to the governor, Botswana is best known for diamonds, which she said are a depletable resource. She said the diversification process away from over-dependence on mining has been hesitant and slow. 

“Renewable resources can sustain the country’s diversified growth going forward with the help of sustainable finance,” said Mohohlo.

Berkeley University’s School of Business defines sustainable finance as “the financing of an activity that creates not only a private economic rate of return to investors but also social value”.

Mohohlo said as a result of the implementation of the Financial Sector Development Strategy which began in 1989, major milestones have been achieved in financial sector development.

She said government and corporate bond issuance and trading have, to some extent, improved the liquidity of the domestic securities market.

“It is also the case that banks are yet to tap fully into opportunities for financing small and medium-scale businesses that can add value to some of the country’s rich natural resources, with the possibility of developing traditional pharmacological products and tourism-related activities,” she said.

Mohohlo further said BoB continues to impress on banks to expand access to banking services as a sound forward-looking business strategy.

“But narrow considerations of short-term profits tend to prevail, and underpinned by relatively high bank charges. Needless to add, high bank charges throttle access to banking services and, in turn, retard financial deepening and inclusion,” she said.