NBFIRA Annual Report 2019
Press Release
NBFIRA Releases 2019 Annual Report: “Continuing to Rise”
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NBFI sector assessed to be financially sound, despite decelerating macroeconomic conditions.
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4% growth in NBFI sector asset base up to P121 billion.
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NBFI sector remains profitable at P1.3 billion.
Botswana: The 2019 Annual Report of the Supervisory Authority for the Non-Bank Financial Institutions (NBFI’s), was tabled in Parliament on 28th November 2019. The Report reflects the performance of the Regulatory Authority as well as of the NBFI sector during the 2018/2019 financial year. Audited statements are for the calendar year 2018.
The Regulatory Authority is in its third year of implementing its Strategic Plan 2016-2021, which focuses on using the Risk-Based Supervisory approach to implement its mandate.
“The Regulatory Authority remains a going concern with a strong balance sheet and positive cashflows. In 2018, current assets were P27 million compared to current liabilities of P7 million. The establishment of the Financial Stability Council during the year, was a critical step in enhancing macro-prudential regulation of the non-banking financial institutions”, said Motlalepula Kabomo, Chairperson of the NBFIRA Board.
As at March 2019, the sector comprised of 747 regulated entities, the majority of which operated in the non-bank lending activities and insurance industries.
“Overall the Non-bank financial institutions sector was assessed to be financially sound, with risks remaining low. While the sector remained large relative to nominal Gross Domestic Product at 64%, high capitalisation, a strong liquidity position and profitability contributed to the mitigation of risks”, said Oaitse M. Ramasedi, Chief Executive Officer of NBFIRA.
In the Insurance Industry, total gross written premiums increased to P5.4 billion in 2018 compared to P5 billion in the prior year. The life insurers business remained dominant within the Insurance industry, accounting for 85% of industry assets and 74% of gross written premiums. The capital ratio of the Life Insurers business strengthened from 16% in 2017 to 19% in 2018 primarily due to the decrease in total assets emanating from the deregistration of one entity with a balance sheet total of P6 billion. Furthermore, the life insurance sector registered growth in gross written premiums of 11% in 2018, compared to an 8% growth for General insurers during the review period.
Following the commencement of the Securities Act (2014) in April 2017, the Capital Markets Industry experienced notable progress. This entailed an improvement in compliance by market players, as well as growth in the number and complexity of product offerings such as debentures and derivative instruments. Furthermore, the Botswana Stock Exchange (BSE) achieved a significant milestone when it was demutualised on 2nd August 2018, becoming a company limited by shares. As at 31st December 2018, the Government of Botswana owned 80% of the BSE shares, with the balance being owned by four local stockbrokers. Market Making Rules were introduced in August 2018, bringing about greater transparency and price discovery in the market place. Reforms were ongoing with the aim of centralising the trading, clearing and settlement of Government bonds on central bank money.
The businesses operating in the capital markets remained profitable recording profits of P1.2 billion in 2018, compared to P1.3 billion in 2017 as growth in expenditure outweighed growth in revenues. The sector recorded a balance sheet growth of 11% in terms of total assets. IFSC accredited companies recorded a decrease in profits to from P1,1 billion in 2017 to P1 billion in 2018.
As at March 2019, the Lending Activities Industry recorded an increase in the number of licensed entities to 342 from 324 the previous year. The Micro-lending businesses continued to dominate the industry, ending the year with 216 licensed entities. Exemptions were issued to Pawnshops, Finance and Leasing companies pending the promulgation of the industry-specific legislation. The top 20 micro-lenders registered a 3% increase in profits before tax to P508 million in 2018. Total assets grew by 11% to P4.8 billion in 2018 vis-à-vis P4.3 billion in 2017.
The Retirement Funds Industry assets based on audited figures during the calendar year 2018, registered a 4% increase and remained dominant at P82 billion or 37% of the financial sector assets. However, management accounts (unaudited figures) for the quarter ended 31st December recorded a decline in assets from P 82 billion in 2017 to P 79 billion 2018 as a result of a reduction in prices of off-shore investments and unfavourable foreign exchange rates. Based on management accounts the ratio of retirement funds assets to nominal GDP fell to 42% in 2018 from 45% in 2017.
Current guidelines stipulate that a minimum of 30% of assets be invested in the domestic market, the objective being to support the development of the domestic capital markets. As at 31st December 2018, local assets accounted for P32.3 billion (41%), while offshore investments were P46.7 billion (59%). This compares with a 35%/65% local/offshore split in the prior year, indicating increased allocation to the domestic market. Equities still dominate pension fund assets allocation at P53 billion (67%) in 2018.
Against the backdrop of Botswana’s grey-listing by the Financial Action Task Force (FATF), the Regulatory Authority continued to strengthen its oversight role by incorporating a new objective of effectively deterring financial crime in its strategic plan. In addition, the Regulatory Authority increased its human resource capacity, enabling it to increase the number of inspections with a focus on the Insurance and capital market industries. Inspections conducted in line with priorities outlined in the National Risk Assessment (NRA) and the AML/CFT Risk-Based Supervision Manual, uncovered low levels of compliance to the seven main obligations of the Financial Intelligence Act. Other sectors were largely observed through offsite risk monitoring.
“A sectoral risk assessment awarded medium-high inherent risk ratings for the insurance and capital markets industries due to the nature of business of life insurance and investment products as well as the significant assets they hold. The Retirement Funds and Lending activities sectors received medium risk ratings, with the majority of products suggesting a lower risk”, said Ramasedi.
In conclusion, Ramasedi extolled the strategic leadership and commitment of the Regulatory Authority’s Board and the cooperative engagement by NBFIs. He thanked his management team and staff for their commitment to fulfilling the Regulatory Authority’s mandate.
Notes to Editor
About the Non-Bank Financial Institutions Regulatory Authority (NBFIRA)
Established by an Act of Parliament in 2006, the Regulatory Authority began its operations in 2008 and since then has achieved significant regulatory and supervisory milestones that have enabled the NBFI sector to grow and operate in line with international standards and best practices. The Regulatory Authority oversees the NBFI sector, which in 2018 had assets worth approximately P121 billion, accounting for 55% of total assets in the local financial system. In the same year, the sector comprised of just under 750 regulated entities and had a gross income of P17 billion. The Regulatory Authority is governed by the NBFIRA Act (2016) which repealed the previous NBFIRA Act (2006).
The Annual Report is published in fulfilment of the Regulatory Authority’s statutory requirement of Section 34 of the NBFIRA Act (2016). The Report provides key highlights of the NBFI sector performance, the Regulatory Authority’s operations and audited financial statements. The Report is available on the Regulatory Authority’s website www.nbfira.org.bw.
For more information, please contact:
Boa M. Chombah
Head, Communications & International Affairs
Tel: +267 310 2595 / 368 6100
Email: info@nbfira.org.bw; or bchombah@nbfira.org.bw
Annual report available on this link
https://www.nbfira.org.bw/sites/default/files/NBFIRA%20Annual%20Report%2...
