The GCR Financial Institutions Sector Risk Assessment
The Financial Institutions sector risk score (ranging from 0 to 15) is a key factor in the operating environment component score. The core of the GCR Ratings Framework is based on GCR’s opinion that an entity’s operating environment largely frames its creditworthiness. As a result, the operating environment analysis anchors the underlying risk score for the GCR rating methodology. GCR combines elements of the country risk and sectoral risk analysis, blended across countries for entities operating across multiple jurisdictions, to anchor an insurer to its current operating conditions. For more details on any of the above, please read the related criteria and research listed below.
GCR periodically publishes updated “Financial Institutions Sector Risk Scores”, which supersede previous publications. The publication titled “GCR Financial Institutions Sector Risk Scores, 15 June 2021”, available at https://gcrratings.com/risk-scores/, supersedes the article published on 26 May 2021.
Botswana Financial Institutions Sector Risk score: ‘6.5’. Country Risk Score 7.75, Mapping Table 7.5 to 8.0
The Botswana financial sector risk score has been revised upward, reflecting good asset quality, healthy capitalisation that continues to be driven by favorable profit margins even amidst a challenging operating environment, high proportion of deposit-based funding, sufficient liquidity, and strength of the sovereign. We think banking regulation is adequate, while the concentrated sector structure resembles that of neighboring peers (top four banks account for just under 80% of total sector assets) underpinning overall sector stability. In addition to this, foreign currency lending is low and the operating environment is conducive to sustain the observed trends in these key performance factors given the expected recovery in the country’s GDP growth in 2021, comparably low household indebtedness, and a large public sector presence (with specific reference to the employee base of government/public institutions) which underpins income security and is expected to support broadly resilient asset quality within the core household lending portfolio of the sector-wide banking system.
Senior Financial Institution Analyst
+27 11 784 1771
Group Head of Ratings
+27 11 784 1771
Related criteria and research
Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Financial Institutions, May 2019
GCR Ratings Scales, Symbols & Definitions, May 2019
GCR Country Risk Scores, June 2021
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.
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