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COVID 19- The aftermath



Many home owners were reportedly left swimming in debt after COVID-19 wiped out their jobs and left them struggling to repay their mortgage loans.

With banks and sheriffs breathing hard on their backs and some having already lost their houses, constituency Parliamentary offices and law firms are said to be inundated with desperate pleas of Batswana who need protection to save their homes.

The matter reached Parliament last week with Selebi-Phikwe West member of the house, Dithapelo Keorapetse putting the minister responsible for Finance, Peggy Serame to assure Batswana on this matter.

The big question was whether or not the government has anything in place to save the property of those who failed to repay loans due to job losses caused by COVID-19pandemic and below is how FRANCINAH BAAITSE captured the minister’s question time.

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KEORAPETSE: There is no doubt that COVID-19 has not only lead to loss of lives of thousands of Batswana and left many families in anguish and sorrow.

The disease has also left the economy in tatters. Many people have lost their businesses, jobs and livelihoods notwithstanding the state of Public Emergency, which professedly prevented job losses through retrenchments.

It is UDC’s considered opinion that as many of our people struggled to even put bread on the table during COVID-19 pandemic and its resultant economic catastrophe, Government has a social democratic responsibility to step up and help. We accordingly appreciate some efforts done, although they are inadequate.

This question is about home owners’ protection in particular, to understand what Government has done to protect Batswana who are struggling with foreclosures.

The starting point is to understand the extent of the problem. Are you adequately apprised on the extent of the problem?

SERAME: Botswana like other developing economies implemented a targeted fiscal, financial and liquidity support measures to support the affected sectors of the economy, including households.

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The financial support by Government entailed wage subsidies and loan guarantees to eligible small and medium enterprises.

On the advent of COVID-19 pandemic, Band of Botswana undertook relief measures in the form of reduction of the capital adequacy ratio from 15 per cent to 12.5 per cent; bank rate from 4.5 per cent to 3.75 per cent; primary reserve requirement from 5 percent to 2.5 per cent among others.

Furthermore, Bank of Botswana endorsed the initiative of the banking industry to reschedule the service of loans including selective moratoria on qualifying performing loans with a good repayment history for up to six months, effective 1st April 2020 and an offer to restructure loans for entities adversely affected by COVID-19.

To support that initiative, the banks suspended the raising of specific provisions by banks against loans qualifying for payment moratoria, thus reducing the credit risks arising from the negative effects of the COVID-19 pandemic on banks’ customers.

KEORAPETSE: Does the Minister have an idea of the number of people who experienced financial hardships directly and indirectly due to the Coronavirus pandemic, who struggled to make mortgage payments and sought payment relief from banks since COVID-19 engulfed us?

As at 31st December 2020, a total of 7,850 loan accounts in the banking industry had been given a payment holiday. Private sector enterprises loans accounted for 78.5 per cent of loans granted payment holiday in December 2020.

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At 30.4 per cent, commercial real estate loans were the largest share of the loans granted payment moratorium.

Household loans accounted for 12 per cent of loans granted payment moratorium.

On a quarterly basis, the number and value of defaulting mortgage accounts that were restructured during the pandemic period under the categories of owner occupied and rented; is an average of 329 accounts valued at P289 million per quarter.

KEORAPETSE: How many Batswana have applied for COVID-19 hardship mortgage forbearance in banks since the outbreak of the pandemic in the country? How many banks and which ones provided forbearance for reasonable periods?

Consistent with the International Financial Reporting Standard Nine (9), a higher credit risk would potentially increase the expected credit loss charge.

Against this background, the bank generally exercises regulatory forbearance in relation to assessment of non-performing loans and determination of expected credit losses for regulatory and compliance purposes.

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From the Banking Supervision Report 2020, loans granted payment moratorium by commercial banks amounted to P4.3 billion, P7.3 billion, P6 billion and P5.6 billion in April, June, September and December 2020 respectively, representing shares of 8 per cent, 11.4 per cent, 9.5 per cent and 8.5 per cent in gross loans and advances.

KEORAPETSE: The Minister should update this Honourable House on initial forbearance plans which lasted months and those that were extended up to more than a year.

Most importantly, what was the role of the Government or the Central Bank in such arrangements? What has been the conversation Honourable Minister between Government and banks regarding the same?

SERAME: Following guidance by Bank of Botswana(BoB), National Development Bank (NDB) developed and implemented COVID-19 forbearance strategies, which included but were not limited to the following: They offered customers repayment holiday up to six months from 1st April 2020.

The accrued interest during the repayment holiday were capitalised into the loan account.

Reduction of instalment by up to 50 per cent for a period of six months for cash flow relief as a substitute for payment holiday and an extension of repayment periods for up to 12 months for the affected customers.

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The NDB granted forbearance measures for a total of 104 clients up to 12 months.

NDB was proactively monitoring these accounts and further extended repayment holiday up to December 2020 for nine customers.

During 2021, three accounts valued at P40 million were further accorded extended repayment holiday leading to December 2021.

A total of 34 customers with a total outstanding balance of P19.6 million under Bonno and Equity, which is home ownership, benefited from the forbearance initiatives.

The Botswana Building Society Limited (BBSL) on the other hand implemented the following COVID-19 measures to assist customers; these included repayment holidays, restructuring of loans and improving credit assessment and collection processes.

From April 2020 to the end of December 2020, BBS assisted 555 mortgage customers with payment holidays.

KEORAPETSE: Owning a home is considered a basic human right by the Umbrella for Democratic Change.

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We view it as a staple for a Motswana way of life. We have a considered opinion that there has to be a budget allocation to support home owners struggling with foreclosure.

The question is, is it part of this Government’s plan to restore home ownership’s stability?

There has to be protection programme for home owners by providing mortgage assistance relief services in our humble view. Is the programme in place or envisaged?

In relation to Home Ownership Protection, I would like to highlight to this Honourable House that the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) ensures that customer rights are protected in the assessment of insurance products and that the products are suitable in mitigating the insurable risk.

The insurance industry is regulated under the Insurance Industry Act, 2015, Cap. 46:01 to ensure NBFIRA is empowered to approve all insurance products before they are offered to the public.

Furthermore, as I have previously reported to this Honourable House, the review of the Retirement Funds Act is ongoing and one of the areas under consideration is the introduction of pension backed mortgage loans.

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Under this arrangement, pension fund members, that is those who have not yet started earning a monthly annuity, will be in a position to get direct loans from Pension Funds or to use part of the accrued pension as a security for mortgage loans.

KEORAPETSE: Payment holidays were extended but they may have been extended to people who have lost their jobs and are still out of their jobs, or they have lost their businesses and up to now they have not recovered but the holiday has ended.

Now, what is the social democratic responsibility of Government in terms of extending financial assistance? That is the key part.

YANDANI BOKO (Mahalapye South):In Kgotla meetings people have expressed their concern that they are losing their property because due to COVID-19, they have failed or defaulted to repay their mortgage loans and some have desperately approached law-firms with hope to protect their property from being confiscated by banks and this is where the concern is, how is the government going to help?

SERAME: Like I said, each individual case has to be dealt with according to its merit because each case is different.

But what I can advice is that our door is open, those who need help should come forth and we will help where we can.

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These are issue which are still on the table, we are looking at ways in which we can help Batswana in the best way possible.

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