Botswana households are sinking deeper into debt as rising borrowing costs and a weak economic environment squeeze disposable incomes.
According to the latest Bank of Botswana’s 2025/26 Household Indebtedness Survey, debt repayments consume 63 percent of bank customers’ income.
The survey shows household debt increased from P68.6 billion in December 2024 to P70.3 billion in December 2025 which is a 2.5 percent rise. The latest development comes even as the economy struggled with a contraction driven largely by subdued global diamond demand and declining fiscal revenues.
The report shows that while the increase in household borrowing was moderate, the pressure on borrowers is intensifying with interest rates climbing across major lending products and banks tightening their lending conditions amid concerns about repayment risks.
The central bank warns that the combination of weak economic activity, constrained liquidity and a deteriorating fiscal position could gradually undermine households’ ability to honour their financial commitments.
The central bank warns that the combination of weak economic activity, constrained liquidity and a deteriorating fiscal position could gradually undermine households’ ability to honour their financial commitments.
“These developments weighed negatively on domestic liquidity conditions, resulting in tight financing conditions, and thereby raising concerns on the capacity of households to service debt obligations,” the survey states.
Household debt rose marginally from 26 percent of gross domestic product in 2024 to 26.1 percent in 2025. This reflects what the central bank describes as limited credit expansion alongside weaker economic activity. But the relatively stable debt-to-GDP ratio offers little comfort to households already struggling to meet monthly repayments.
The survey records a debt service-to-income ratio of 63 percent highlighting the substantial share of household income committed to servicing loans rather than meeting everyday expenses.
The findings suggest that borrowing is becoming increasingly expensive at a time when households face a challenging economic environment, leaving less room to absorb unexpected expenses or further increases in the cost of credit.
Credit card borrowing emerged as the most expensive bank lending product in 2025, with the average interest rate rising sharply to 27.9 percent from 19.8 percent in 2024.
Unsecured loans also became significantly more expensive, with average interest rates increasing to 18.3 percent from 12.9 percent. The highest reported rate on unsecured lending jumped from 25.5 percent to 31.8 percent.
Mortgage borrowers were not spared. Average mortgage interest rates increased to 10.6 percent from 8.5 percent, while the maximum reported rate climbed to 22.5 percent from 14.5 percent.
Motor vehicle loans also became more expensive with average interest rates rising to 12.5 percent from 9.9 percent.
The increases mean households seeking credit to finance homes, vehicles or everyday expenses face a more expensive borrowing environment, potentially compounding pressure on already stretched budgets.
“The dominance of government employees in both banks and micro-lenders may, in part, reflects strong repayment profile due to employment and income stability in the public sector,” the survey states.
The survey shows that government employees are the dominant recipients of household credit accounting for 74 percent of bank lending and 79 percent of micro-lender lending.
Private-sector employees accounted for 25 percent of bank lending and 21 percent of micro-lender lending.
Unemployed and self-employed borrowers jointly accounted for the remaining 1 percent of bank lending, while self-employed individuals represented less than 0.01 percent of micro-lender lending.
The central bank attributes the dominance of public servants partly to the stability of their incomes and the predictability of repayments.
“The dominance of government employees in both banks and micro-lenders may, in part, reflects strong repayment profile due to employment and income stability in the public sector,” the survey states.
It adds that many public-sector employees participate in scheme loans, which allow repayments to be deducted directly from their salaries. Approximately 64.5 percent of total household loans were scheme loans, down from 70.6 percent in 2024.
Loans with deduction-from-source arrangements accounted for 65.4 percent, compared with 69.9 percent in the previous survey.
