Legislator decries �unproductive� household debt
Isaac Pinielo | Tuesday October 10, 2017 15:12
Speaking at the launch of a new financial literacy product by Liberty Life Botswana, dubbed ‘Mind My Money’, she said it is a great concern to government and partner entities that there is a notable increase in household indebtedness.
Kenewendo attributed this to living beyond means and wanting to fund lifestyles or projects that one cannot afford, and not utilising the appropriate financial instruments available in order to prepare for tomorrow today.
“It is subsequently a key government priority to reduce household debt in Botswana through various interventions including partnerships with organisations such as Liberty Life,” she said.
Apart from being indebted to microlenders, and other informal arrangement such as Metshelo, households are also the biggest debtors to commercial banks owing P31.5 billion, which accounts for almost 60% of the P52.7 billion lent out by banks.
According to Kenewendo, who is also a qualified economist, the 2015-2020 Financial Inclusion Roadmap outlines financial literacy as one of the key implementation priority areas to promote financial inclusiveness in Botswana.
“Lack of understanding of financial products was identified as a specific barrier to access by both consumers and product providers,” she said.
She said the priority highlights consumer empowerment and protection as key actionable points to enable Batswana to have access so that they fully benefit from financial products available.
“It goes on to highlight the scope for service providers and intermediaries to provide more information and training on their products to prospective customers, especially during teachable moments, as the proportion of adults currently seeking financial advice from financial institutions and financial advisers is notably low,” she said.
Most adults making up to 49%, Kenewendo said either go to friends and family, or do not get any financial advice, compared to four percent who go to a financial institution and two percent to a financial planner or broker.
Other areas of need identified in the research, she said, include a lack of understanding of obligations and risks of debt, managing debt, over-indebtedness, role of insurance in risk management, and general understanding of how financial products can improve the life of consumers.
Kenewendo indicated that these improvements are to be complemented by a strengthened financial literacy programme in the education system, clearer disclosure of credit obligations, and more effective systems of credit burden assessment.
“This priority is in play and is coordinated by the Ministry of Finance and Economic Development,” she said.
She pointed out that the Mind My Money programme is a specific intervention towards improving financial inclusion in Botswana through the education and empowerment of the consumers.
Liberty Life managing director, Lulu Rasebotsa said financial planning and management does not happen accidentally, but needs a concerted and strategic effort.
“We believe that if people are armed with knowledge on financial literacy, they will be equipped to make positive decisions in how they plan and ultimately manage their finances,” she said.