MICROCAPITAL BRIEF: Government of Botswana to Stop Facilitating Repayment of Microfinance Loans by Civil Servants

The government of Botswana has announced that it will cease acting as an intermediary between microfinance institutions (MFIs) and civil servants for the collection of microloans through the provision of “deduction-at-source” from public servants’ wages [1]. This provision reportedly resulted in a default rate close to zero, enabling civil servants to have an easy access to microloans. This decision will become effective on December 1, 2011.

Microlender Letshego Holdings Limited of Botswana (Letshego) reportedly reacted to the news with an announcement that it will use alternative methods for collection of the monthly payments such as via electronic debit orders. Converting to these alternative methods will however increase operating expenses.

Letshego currently offers loans of up to BWP 200,000 (USD 26,500) and is collecting repayments totaling approximately BWP 66 million (USD 8.7 million) per month from civil servants. US-based credit ratings and financial analysis company Moody’s Corporation has changed its outlook of Letshego’s Ba3 long-term issuer rating from stable to negative [2].

As of January 2011, Letshego reported total assets of BWP 2.427 billion (USD 353 million).

By Nisha Koul, Research Associate

About Letshego Holdings Limited: Founded in 1998, Letshego Holdings Limited is an African financial services company based in Bostwana that provides short- to medium-term unsecured consumer loans. In addition to Botswana, the company operates in Swaziland, Uganda, Zambia, Mozambique, and Tanzania. As of January 2011, it reported total assets of BWP 2.427 billion (USD 353 million). Letshego’s major shareholders include the International Finance Corporation (IFC), the Netherlands Development Finance Company (FMO), Sanlam, Investec and Kingdom Zephyr. The company does not report to the US-based nonprofit Microfinance Information Exchange (MIX).

Sources and Additional Resources:

[1] Mmegi Online, “Govt throttles lifeline to micro loans,” http://www.mmegi.bw/index.php?sid=4&aid=208&dir=2011/September/Friday9

[2] Moody’s Press Release, “Moody’s changes outlook on Letshego Holdings’ Ba3 rating to negative,” http://www.letshego.co.bw/doc/Moody%27s_Press%20Release_change%20in%20outlook_Letshego_16%20September%202011.pdf

MicroCapital.org story, August 16, 2011, “MICROCAPITAL BRIEF: Survey: Nigeria Falls Behind South Africa, Kenya, Botswana in Financial Access,” https://www.microcapital.org/microcapital-brief-survey-nigeria-falls-behind-south-africa-kenya-botswana-in-financial-access/

MicroCapital.org story, March 2, 2010, “MICROCAPITAL BRIEF: Letshego Holdings of Botswana to Finalize $8.2m Sale of Two Subsidiaries in Order to Focus on Microfinance Activities in Sub-Saharan Africa,” https://www.microcapital.org/microcapital-brief-letshego-holdings-of-botswana-to-finalize-82m-sale-of-two-subsidiaries-in-order-to-focus-on-microfinance-activities-in-sub-saharan-africa/

MicroCapital Universe Profile: Letshego Holdings Limited, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Letshego+Holdings+Limited

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

Similar Posts: