With ballooning household borrowing from "all possible sources" showing an unprecedented rise in consumerism, Botswana will need financial education and more stringent regulations to curb increasing bad debt and arrears, analysts warn.

An alarming 60 percent (P10.2 billion) of lending by banks currently goes to household spending.

This emerged at a consumer credit forum organised by the country's oldest and biggest fund manager Bifm and South Africa's FinMark Trust on Tuesday at the Gaborone Sun.

The majority of presenters pointed to a disturbing trend in which household borrowing is mainly for unspecified spending rather than for mortgages.

"There are warning signs, here which show us that something has to change because this cannot be sustained in the long run," said the CEO of Econsult, renowned economist Keith Jefferis.

An outdated regulatory framework leaves the majority of Batswana vulnerable to indebtness and arrears as evidenced by a rise in default judgments in the form of "In the Matter Between" adverts in the newspapers.

Jefferis, who is also the Chairman of Bifm Investment Committee and the Botswana consultant for FinMark Trust, said he supports an increase in regulation.

Botswana could benchmark from South Africa's National Credit Act, which was hailed a success in the wake of the credit crunch, and set up a credit bureau tasked with analysing, monitoring and regulating consumer credit and worthiness.

Statistics shows, that over the past eight years, total bank credit has risen sharply, from an average of P5 billion at the start of the millennium to P17 billion in 2009.

Professor Carel van Aardt of the University of South Africa's (UNISA) Bureau of Market Research said Botswana should be concerned that only P6 billion from the P17 billion household credit goes to savings.

This leaves Botswana's debt/income ratio at 0.31 lower than South Africa's 0.86 while way lower than Finland's 2.5. However, the major difference is that despite Finland's ratio being higher than Botswana's, the Scandinavian country promotes and maintains good debt while keeping bad debt at negative growth.

"The major concern for Botswana is that the huge proportion of debt is unsecured loans," van Aardt said.

As this only refers to banking credit, this means it does not reflect the true picture of Batswana's indebtness because households also borrow from unregulated micro lenders.Currently, the only micro lender that publishes its results because it is a public company is Letshego whose loan book for Botswana stands at approximately P1 billion. In the early 1990s, household credit per GDP was growing at an average of about 11 percent, but that has since dropped sharply to 6 percent."This is worrying because it means that lending is growing faster than the growth of the economy," Jefferis said.

Net indebtness of households has also increased sharply over the years as net borrowing continued to grow faster than deposits; unlike in the 1990s when they were at the same level.

Bifm CEO Victor Senye said the forum forms part of a series of events which they are to host on how to improve Botswana's financial services sector. Senye said they are hosting the forum because they have realised that Batswana are vulnerable to indebtness and end up borrowing from all possible sources.

The forum was themed "Consumer Credit Aceess, Regulation and Financial Vulnerability".