Please explain what the Bank of Botswana MPC’s decision to cut the MoPR means.
The MoPR is one of the monetary policy tools available to the Bank of Botswana to use for influencing the demand and supply of money through controlling interest rates. Banks then follow suit as transmission agents of the Bank of Botswana by reducing the interest rates that they charge on loans as well as reducing rates they pay on deposits. The reduction in the MoPR and subsequently in interest rates means that the central bank has seen it fit to stimulate the growth in the economy by making more money available.
How does this decision affect the everyday Motswana?
The aim of the rate cut is to stimulate growth in the economy through increased expenditure because people will have more disposable income to spend. Economic growth is good for all as it also means that companies have a positive outlook and therefore increase their expenditures resulting in more jobs being created. Employees can also bargain for higher wages. As indicated in the response above, the decision also lowers borrowing costs for products such as mortgages and those who want to purchase large ticket items can do so because of the lower borrowing costs.
Is there anything Motswana can do to take advantage of these rate cuts?
Yes. Those with mortgages, personal or business loans have the option to continue paying the same instalment and not the reduced one to shorten the time it will take to pay off the loans
Those who can borrow at lower rates now can do so. The lower cost of capital can also incentivize companies, including SMMEs, to borrow from banks and start their projects.
Please add anything else about the rate cut decision.
The rate cut and its impact at a personal level should be seen from a financial planning perspective. Individuals should have clear goals about what they are looking to achieve in the long term. Therefore, as and when there are changes to the interest rate, individuals will know what decision to take and when to take that decision. This relates to the acquisition of assets such as mortgages, personal loans or savings products to invest in.
Please share anything else about what BBS Bank is up to
BBS Bank is still very much in the mortgage business, which we continue to encourage Batswana to invest in, especially the youth because it is a sure way to start building one’s wealth.
This year we also launched a number of products and services that appeal to a cross-section of customers because the core of our new brand is that we are a bank for all.
We have a digital banking platform called “Nomad” which has expanded the banking universe for our customers because they can now send to or receive transactions from any bank. It also has a “pay to number” functionality which allows one to send money to a BBS Bank account using the account holder’s mobile number.
Our new unsecured loan product “Ipechetse” is also doing very well. The bank will be rolling out more products and services in 2024 which we are confident will also appeal to the youth.