OFFICIAL OPENING OF FIRST NATIONAL BANK OF
BOTSWANA LIMITED - MOCHUDI BRANCH
Keynote Speech
by
Moses D Pelaelo
Governor, Bank of Botswana
September 19, 2017
It is with great pleasure that I join you for the official opening of
the Mochudi branch of First National Bank of Botswana (FNB).
My team and I are particularly delighted because this is the first
branch of the bank in the Kgatleng District. This is indeed a
positive response to what the Bank of Botswana has been
urging all banks to do, specifically to have a physical presence
in all major villages of Botswana including Mochudi. I am
assured that the branch is well equipped, to the same standard
as is the case with other FNB branches, with modern service
facilities, most notably platforms that harness the beneficial
features of new information and communication technologies.
Through the branch facility and electronic platforms for
conducting banking business, FNB, and other banks, offer
choice and added convenience to customers; this, again is a
welcome development. The widening, deepening and
modernisation of financial services, and the related facilities
nation's
fulfil the Financial Sector Development Strategy and
contribute to both financial inclusion and inclusive economic
growth.
Distinguished Guests, First National Bank of Botswana Limited
is a subsidiary and member of the FirstRand Group, which is a
South African financial services Group listed on the
offering banking, asset
Johannesburg Stock Exchange,
management and insurance services. The FirstRand Group
has a presence in 8 countries in Africa, namely, Botswana,
Lesotho, Mozambique, Namibia, Nigeria, South Africa,
Swaziland and Tanzania. As at June 30, 2017, the FirstRand
Group had assets amounting to R1.15 trillion, with market
capitalisation of R251.5 billion. The Group is, therefore,
well-
endowed to support the domestic and regional resource needs,
with respect to a broad range of financial services. These
include participation in mobilisation of finance and
large-scale
funding of businesses, industrial developments and
infrastructure projects. It is also well placed to support
sustained operation, expansion and further investment in the
local subsidiary, to the benefit of the domestic economy.
In Botswana, the Group offers a variety of financial services
through its three brands, namely, FNB, the retail bank,
Wesbank, for financing of moveable assets, notably motor
vehicles and finance leases for equipment; and RMB in
supporting corporates to access investment banking products
and services including working capital and trade finance, private
equity and global market services. Since commencement of
operations in Botswana in 1991, FNB has grown substantially,
initially through the acquisition of Bank of Credit and Commerce
Botswana Limited in 1992, Financial Services Company of
Botswana Limited in 1993 and Zimbank Botswana Limited in
1994.
More recently, in the past five years, FNB has grown organically
bank's
to be the largest bank in the country. The total assets
increased from P13.9 billion in December 2011 to P23.6 billion
in June 2017. In the same period, loans and advances rose
from P8.3 billion to P15.6 billion, while deposits grew from
P11.8 billion to P18.7 billion. The bank employs a total of 1 269
staff members, most of whom are Batswana; it has a network of
23 branches, 150 cash dispensing Automated Teller Machines,
51 Automated Teller Machines that have deposit taking
capabilities, 25 Slimline Automated Teller Machines and 5 600
point of sales machines in retail outlets all over the country.
Overall, in the 26 years of existence and operations in the
country, FNB has grown in both size and range of products and
services offered. With particular reference to this Mochudi
branch, located here at the Pilane Crossing Mall, the bank adds
to the opportunities for enhancing access to financial services,
notably saving channels, providing financial resources to its
customers, ease of transacting, convenient payment and
related advisory services. The branch potentially extends the
support to economic activity in the local community and
neighbouring areas, and should serve the needs of local
industry, businesses, agricultural pursuits and households,
including the informal sector.
Distinguished Ladies and Gentlemen, FNB Botswana has
embarked on a number of beneficial Corporate Social
Responsibility (CSR) initiatives through the FNB Foundation
and its Staff Volunteer Programme. The focus of these
initiatives is on education; healthcare; skills development;
vocational training; support for disadvantaged and handicapped
people; arts and culture development; and sports and
recreation. Many of the community projects that the Staff
Volunteer Programme supports involve infrastructure upgrades,
such as the renovation of nursery schools, classrooms and
primary healthcare clinics.
I am reliably informed that, here in the Kgatleng District, the
FNB Foundation has changed many lives through partnering
with Community Development Organisations, such as the
Motswedi Rehabilitation Centre, Bakgatla Bolokang Matshelo,
Mochudi Resource Centre for the Blind, Stepping Stones, and
Pudologong Rehabilitation Centre. Through the Foundation,
more than 10 000 pairs of school shoes have been donated to
deserving pupils.
Distinguished Ladies and Gentlemen, let me turn to some
general, but topical financial sector development issues. I
recently made reference to a worrisome trend of non-
performing bank loans; a point that, for emphasis, I would like to
reiterate here. Non-performing loans, or NPLs, as a proportion
of total loans and advances have been on an upward trajectory
industry's
since 2014; the NPLs rose from 3.6 percent in
December 2014 to 3.9 percent in 2015 and 4.9 percent in
December 2016. As at July 31, 2017, the NPLs had increased
further to 5.9 percent of total bank loans. The trend is a cause
for concern. This is despite the fact that these levels of NPLs
are relatively low, by international norms, especially in the
context of prudent and sound accounting practices as well as
the quality and level of capital in the banking system.
Nonetheless, I should emphasise that the concern is not with
respect to the level or growth of credit in the economy. In fact,
the current Private Sector Credit to GDP, of about 30 percent, is
low by international standards, suggesting that there is greater
scope for the banking sector to perform better in mobilising
resources to support economic activity through credit provision.
Broadly, growth in credit that is commensurate with rate of
increase in economic activity and incomes should be
sustainable. Indeed, affordable credit, when put to good use, is
beneficial for economic activity, investment, wealth creation
and, ultimately, increase in living standards. The challenge
arises when there is high leverage, or over-indebtedness,
relative to incomes, and where there is weak financial
management. A combination of these factors, as well as
subdued economic growth, can undermine the ability to repay
bank loans. If left unchecked, unsustainable personal
indebtedness not only leads to financial ruin but threatens the
depositors'
safety and soundness of banks and, by extension,
funds. It is, therefore, critically important to expand financial
education and literacy.
Distinguished Guests, it is for this reason that the Bank of
Botswana and the commercial banks continue to engage in
public education on financial matters through various platforms.
Furthermore, the Bank of Botswana will continue to emphasise
the role of banks and other lenders in the country of instilling
financial discipline, as well as promote 'truth-in-lending" through
greater transparency of credit terms and the true cost of
borrowing over the life of a loan facility. Furthermore, concerted
efforts are required to educate the public, in particular,
consumers of financial services with respect to borrowing and
debt management. I, therefore, call upon other key
stakeholders, including schools, NGOs, trade and credit unions,
social clubs, consumer watch dogs and professional
counsellors to intensify public education on financial matters.
Distinguished Ladies and Gentlemen, on a related matter,
please allow me to implore you to be on guard and vigilant with
respect to the mushrooming of illegal deposit taking activities in
the form of pyramid schemes. I thought it would be appropriate,
to use this forum to appeal to Batswana and to you all,
Distinguished Guests, that you should neither participate nor
"get quick"
peddle any of these rich schemes. These can only
lead to financial ruin, resulting from loss of hard-earned money
and sources of livelihood. I urge you to be suspicious and stay
away from anybody offering exceptional returns. The general
guide is that, in any country, returns or rate of profit on any
investment should be around the general level of interest rates,
the growth rate of the economy or the average return of the
companies listed on the stock exchange. Anything substantially
higher is either too risky to be worthwhile or fraud. As they say,
'if
something sounds too good to be true, it probably is too good
true'.
to be Unfortunately, even the educated, professionals
and people who should be financially literate and, I may add,
some in the financial sector, are gullible and do fall prey to
these illegal and unfair trading schemes. While it is difficult for
the Bank of Botswana to recommend where to look for advice if
confronted by a tricky financial investment situation, and you
are unsure; you may wish to consider the general guide I have
just highlighted.
Director of Ceremonies, Distinguished Guests, a formal, sound
and well-regulated financial sector is the foundation of effective
intermediation, productive use of financial resources and, in
turn, reasonable returns for savers and investors. In this
respect, successful and sustainable banks are essential for the
development of well-functioning money and capital markets.
This is particularly so in Botswana where the banking sector is
a substantial component of the financial system. Moreover,
banks also benefit as deeper and more efficient markets
provide alternatives for sources and placement of funds as well
as more effective liquidity management. This includes the
interbank market, through which banks lend to one another,
typically on a short-term basis. In turn, this improves the overall
allocation of financial resources, including real returns to
depositors and investors, and the channelling of funds to
productive use in diverse areas of economic activity.
Director of Ceremonies, in this context, it is a matter of public
policy concern that money and capital markets in Botswana are
in a rudimentary state of development. As a result, there is a
limited range of instruments and relatively low turnover and
activity in the various markets, more so in relation to
instruments for risk-sharing, distribution and mitigation. This
tends to result in volatility of both prices and volumes, and limits
the choice of instruments necessary for efficient financial and
business management. For the banks, in particular, a diverse
source of funds that includes a large number of retail depositors
and structured long-term funds represents stable funding. This
facilitates maturity transformation and support for the range of
financial resource requirements of businesses, including
infrastructure and utilities projects, as well as households.
Regarding the short-term interbank market, it is important that
banks, although competitors, operate in a collaborative spirit to
address any structural impediments to this lack of development
and low efficiency, with a view to improving the flow of liquidity
and its management in the banking system. The central bank
should only be required to provide or absorb liquidity in the
market after mutually beneficial trading opportunities among
banks are exhausted. The Bank of Botswana already facilitates
such collaboration through industry-wide fora that address
issues of mutual concern related to market development in
order to foster enhanced and effective support for real
economic activity. It is, therefore, important that banks strive for
constructive engagement, in this regard, in order to achieve the
best outcomes in terms of effective policy transmission and
enhanced contribution by the financial system to economic
performance.
Distinguished guests, ladies and gentlemen, as I conclude, let
me thank the Chief Executive Officer, Mr Bogatsu, the Board,
Management and staff of FNBB, for inviting me to be part of this
occasion. I wish the bank well and look forward to many more
invitations for the opening of FNBB delivery channels or yet
"brick mortar"
another and branch, especially in major villages,
such as Mochudi and, of course, the rural areas. To Bakgatla,
Dikgosi tsame, Member of Parliament for Mochudi West,
District Commissioner, Council Chairman and Council
Secretary, Honourable Councillors, the entire district leadership
and all Distinguished Guests, in addition to the other banks,
there is now a branch of FNB Botswana near you; patronize it;
and do not give Mr Bogatsu and his team an excuse to close
the branch, shortly after its opening, on account that it is not
profitable.
Distinguished ladies and gentlemen, with those few remarks, it
is now my singular honour and privilege to declare the First
National Bank of Botswana Mochudi branch, officially open.
I thank you for your kind attention.