Botswana's businesses are losing their appetite for bank loans, and the Bank of Botswana's own numbers now show it plainly. Preference for loans fell from 43 percent in the first quarter of 2026 to 28 percent in the second quarter, according to the central bank's June 2026 Business Expectations Survey, as reported by The Business Weekly & Review.
Over the same three months, preference for equity financing rose sharply, from 5 percent to 17 percent. Firms are choosing to bring in owners' capital rather than take on debt they may struggle to repay. It is a sober, defensive shift, and a rational one.
Borrowing costs named the top burden on business
The Bank of Botswana identified the cost of finance as the single biggest factor weighing on business operations in the second quarter of 2026. High interest rates, collateral requirements and strict documentation are making credit harder to obtain, particularly for smaller firms that lack the assets banks demand.
Despite the cost, businesses still expect lending rates and borrowing volumes to rise over the twelve months to June 2027, particularly in the domestic market. Firms anticipate borrowing more simply to manage operations, expenses and cash flow, not to expand. That is a warning sign. Debt taken on to survive rather than to grow leaves a business fragile when revenues dip.
What the survey covered
The quarterly Business Expectations Survey gathered views from businesses across thirteen economic sectors, including agriculture, mining, manufacturing, construction, wholesale and retail, transport, accommodation and food services, finance, real estate and professional services. Respondents were asked about economic conditions, performance, inflation, lending rates and financing.
Retained earnings remained the leading source of funding for Botswana's firms. These are profits a business keeps to fund its operations instead of distributing them to owners. In plain terms: the businesses doing best are the ones financing themselves, not the ones queuing at the bank.
Why access to credit matters more than price
The survey found that 45 percent of businesses identified access to credit as the main factor influencing their choice of credit market. A further 25 percent cited credit availability, while 20 percent pointed to affordability. The remaining 10 percent cited a combination of factors.
The message to lenders is clear. Firms are not shopping for the cheapest loan; they are shopping for any loan they can actually get. Banks that respond by loosening documentation demands or accepting a wider range of collateral will win the business. Banks that do not will watch firms turn to investors instead.
The pattern is not unique to Botswana. An analysis of the Federal Reserve's Q3 2026 survey by Funder Intel found that banks narrowed loan spreads but raised premiums on riskier loans for borrowers of every size, with small firms also facing tighter collateral requirements. The Lead-Lag Report similarly documented weaker net demand for commercial and industrial loans across firm sizes in the third quarter, even as banks barely changed their terms. PYMNTS reported that even among the largest borrowers, one in five used credit mainly out of necessity.
Local caution mirrors a fragile recovery
The retreat from debt fits the broader picture of Botswana's economy. Weekend Post, citing a new assessment by Econsult, reported that the economy is emerging from two consecutive years of contraction, but the recovery remains fragile. Growth still depends heavily on diamond production, while household consumption, private-sector activity and bank lending remain weak. Bank of Botswana figures cited by Mmegi Online show that weakness persisted in swiping values through the half-year, with the drop steeper than it appeared only because of some second-quarter recovery.
A business owner reading these numbers should draw the obvious lesson: do not borrow to paper over weak demand. Before taking any loan, a firm must weigh interest rates, repayment periods, extra charges and, above all, whether future income can genuinely cover repayments. A loan that cannot be serviced is not financing; it is a slow-motion failure.
What firms and lenders should do now
Businesses that struggle to qualify for loans have respectable alternatives. Reinvesting profits, bringing in investors, or combining funding sources are all more durable paths than debt taken under duress.
Financial institutions, for their part, can use these survey findings to close the gap between the products they offer and the needs businesses actually have. Regularly reviewing financing trends helps firms plan ahead, compare suitable funding sources and manage risk. It also helps lenders see where their offerings fall short.
Botswana's firms are not refusing credit out of timidity. They are refusing it because the terms on offer do not match the conditions on the ground. When banks price risk sensibly and lend to businesses with solid plans, borrowing will resume. Until then, the self-financed firm, disciplined and answerable to its own owners, remains the sturdiest institution in this economy.
FAQ
How much did loan preference fall in Botswana?
Preference for loans fell from 43 percent in the first quarter of 2026 to 28 percent in the second quarter, according to the Bank of Botswana's June 2026 Business Expectations Survey.
What replaced loans as a funding preference?
Preference for equity financing rose from 5 percent to 17 percent between the first and second quarters of 2026, while retained earnings remained the main source of financing overall.
What is holding back business borrowing in Botswana?
The Bank of Botswana named the cost of finance as the main factor negatively affecting business operations in the second quarter of 2026, with high interest rates, collateral requirements and strict documentation limiting access to credit.