HIGHLIGHTS OF THE BOTSWANA COUNTRY REPORT

Transcription

1 HIGHLIGHTS OF THE BOTSWANA COUNTRY REPORT B Y D R K E I T H J E F F E R I S, E C O N S U L T B O T S W A N A 3 1 / 1 0 /

2 CONTENTS INTRODUCTION BOTSWANA STUDY Contribution of Agriculture to GDP Rural Incomes and Poverty rates Policy framework for Agricultural/Rural Finance Demand and Supply of Agric Finance Key Issues of Finance Extent to Access of Financial Services in Rural areas Banking the Unbanked CONCLUSION

3 INTRODUCTION Most of Africa is predominantly rural, with poverty more pervasive in rural areas and the agricultural sector making the largest contribution to GDP in many countries The purpose of the project is to gain insight into demand for and supply of agricultural and rural finance; challenges and opportunities Studies were undertaken to examine the current status of agricultural and rural finance in six southern African countries: Botswana, Malawi, Mozambique, South Africa, Zambia and Zimbabwe

4 BOTSWANA STUDY

5 PERFORMANCE OF AGRICULTURE SECTOR 40% Agric % of GDP 35% 30% 25% 20% 15% 10% 5% 0% Source: Econsult, Statistics Botswana Botswana s agric. sector is untypical of Africa contribution to GDP is low and falling Although not very commercial, agriculture provides an important occupation and income source in rural areas. Cattle rearing is the mainstay, but: In 2010 Botswana lost access to the lucrative EU beef market Poor management of the cattle industry Generally, shortages of skilled labour, and other inputsespecially water

6 RURAL INCOMES AND POVERTY RATES Urban Urban Villages Rural Avg monthly income Poverty (head count)rate Source: Statistics Botswana 30% 25% 20% 15% 10% 5% 0% BCWIS (2009/10): Rural mean income 1/3 of urban mean income Poverty in rural is approx double of that in urban areas sources of income are wage employment, pensions and remittances approx. 4.6% of adults made a living from farming poverty has fallen sharply in rural areas, but mostly due to transfers not earned income

7 RURAL POPULATION DISTRIBUTION 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Econsult, Statistics Botswana Botswana has experienced rapid urbanisation Urban population includes cities, towns and urban villages Majority of the population has been urbanised since late 1990s Rural population now approx 36%

8 POLICY FRAMEWORK A range of policies is relevant to rural and agricultural development: agricultural policy: food security (but becoming blurred with selfsufficiency) National Master Plan for Agricultural and Dairy Development (NAMPADD) - commercialisation Arable Lands Development Programme (ALDEP) -Discontinued Integrated Support Programme for Arable Agriculture Development (ISPAAD) support for subsistence farmers Rural Development Policy (2003) National Settlement Policy (1998) allocation of large amounts of public resources to agriculture and the rural areas (e.g. infrastructure) little explicit attention paid to access to finance

9 DEMAND FOR AGRICULTURAL FINANCE Potentially diverse demand (both long and short term) but lack of data makes it difficult to quantify the demand Demand for finance potentially by agricultural producers, dealers and processors: the purchase of production inputs purchase of livestock purchase and servicing of implements marketing of produce management of cash flow better risk management crisis management The demand mainly provided by the cattle industry, plus commercial arable agriculture, horticulture etc.

10 OTHER POTENTIAL RURAL FINANCE DEMAND Traders Small-scale rural non-farm enterprises Tourism enterprises Not just credit, also: Savings (households) Payments for goods and services Transfers (incl. remittances, salaries, pensions, social welfare) Insurance Rural economy highly dependent upon external financial injections (salaries, social welfare payments) and private remittances

11 USE OF LOANS/CREDIT BY SETTLEMENT Uses of loans Urban Urban village Rural Total Buy/renovate house 2.9% 3.1% 1.2% 2.3% Buy car 3.0% 2.6% 4.1% 3.3% Pay off debt 3.8% 3.3% 2.1% 3.0% Start/expand business 0.3% 0.9% 0.8% 0.7% Funeral/burial 0.2% 0.9% 0.6% 0.6% Other 7.1% 7.0% 6.8% 7.0% Total borrowers 17.3% 17.8% 15.5% 16.8% Results from the 2009 Finscope study show: Rural areas use credit mainly for income smoothing and food security Urban respondents use credit to pay off debts Relatively low use of credit for business by either settlements

12 SUPPLY SIDE FOR RURAL/AGRICULTURAL FINANCE Settlement size No. of settlements No. with bank branch % of settlements covered >25, % 10,000-25, % 5,000-10, % >5,000 n/a 1 n/a Source: Econsult Botswana, Statistics Botswana Botswana is sparsely populated therefore limited supply of bank branches and ATMs Just over 52% of population live in settlements served by branches 48% of the population is unserved No bank branches in rural areas

13 SUPPLY OF SPECIALIZED AGRIC FINANCE Lending for agric-enterprises is less than 1% of total lending and 2% of total bank lending CEDA, Young Farmers Fund, NDB data on agric financing by was unavailable Some specialized services: Agric insurance by Agrinsure facilitated by the Agric-Hub Agric credit guarantee scheme by NDB and MFDP Two banks have agricultural finance divisions

14 KEY ISSUES OF FINANCE: Physical Access: How far must a person travel to access the financial service? Dispersed Demand Institutional capacity Affordability: The financial service must be affordable to the user; High information and transaction costs Lack of usable collateral (Tribal land issues) Appropriate Features: meeting the user s particular needs for financial services High farming risks

15 FINANCIAL ACCESS STRAND

16 ACCESS TO BANKING

17 FINANCIAL ACCESS STRAND BY SETTLEMENT

18 ACCESS TO DIFFERENT TYPES OF FINANCIAL SERVICES BY TYPE OF Source: Finscope study 2009 SETTLEMENT Access to different types of financial services by type of settlement: Savings is the most accessed and used financial service in rural areas use of insurance is fairly equally distributed across settlement types Urban and urban villages have more access to credit than rural

19 COMPARATIVE USAGE OF FINANCIAL SERVICES Source: Finscope study 2009 More formal financial services than informal unlike in some East African countries

20 EXTENT OF ACCESS TO FINANCIAL SERVICES IN RURAL BOTSWAN BY GENDER AND AGE Gender Banking Status Banked Male Female Age Group Banking status Banked Unbanked Unbanked Of the respondents on the Finscope 2009 study: Higher proportions of men (47%) were banked than women (34%) Most banked age group was between 40-49years followed by the 30-39year The least unserved age group is the years >

21 EXTENT OF ACCESS TO FINANCIAL SERVICES IN RURAL BOTSWANA BY EMPLOYMENT STATUS Employment Status Paid public sector Paid private sector Banking Status Banked Self employment Seeking employment not seeking employment Retired Other Unbanked From the Finscope study 2009 The most banked are employed in the paid public sector followed by those employed in the paid private sector Those unemployed and not seeking employment are the least banked

22 EXTENT OF ACCESS TO FINANCIAL SERVICES IN RURAL BOTSWANA BY INCOME Income level Banking Status Banked No income 36.5 Unbanked 63.5 P250 or less P P P More than P Source:Finscope study 2009 The higher the income the higher the probability that the respondent is banked Those earning more than P5000 have the highest proportion of the banked Those with no income have the least proportion of the banked

23 IMPROVING ACCESS TO RURAL/AGRIC FINANCE Link to commercialisation of agriculture (NAMPADD, Agriculture Hub) e.g. Feedlots Dairy farming Horticulture Fodder production Biofuels Seed multiplication Large scale agric projects (Pandamatenga) Irrigated agriculture Abattoirs (if BMC monopoly removed)

24 IMPROVING ACCESS TO RURAL/AGRIC FINANCE Financial services for rural households: Bank branches subsidies for under-served areas (as in telecomms) Better use of BotswanaPost/BSB facilities (share infrastructure costs with other public services) New product design low cost, flexible, suitable for small and irregular transactions Use of low-cost technology-based platforms (cell phones and/or smartcards) to bank the unbanked Agency banking Moving G2P welfare, pension payments etc. from a cash basis to mobile/card-based Appropriate regulatory reform (e.g. KYC, banking regulations)

25 CONCLUSION Botswana is in a much better position than many other African countries with regard to access to finance But access to finance for sustainable rural economic activities and rural households is limited Improved access to agricultural finance is critical for agriculture sector transformation from subsistence to commercial Main challenges: physical access, lack of usable collateral, affordability, policy focus on subsistence agriculture Main opportunities: technology; regulatory reform; bank competition; welfare reform