• Pow Rocket Press
  • Posts
  • FNBB joins the rest of the banks in raising interest rates by 7.01%

FNBB joins the rest of the banks in raising interest rates by 7.01%

What this could mean for borrowers

Author

Boago Sephutho
July 04, 2025

Good morning 😃🌞☀️, let’s get into it

FNBB has increased its Prime Lending Rate by 100 basis points — that is, from 6.01% to 7.01% — effective last Friday  .

What does this mean for borrowers and the economy?

1.Higher borrowing costs

  • Existing variable-rate loans (e.g. mortgages, business overdrafts) will become more expensive immediately.

  • New borrowers will face steeper interest charges, dampening demand for credit in the short term.

2.Cooling effect on spending and investment

  • Individuals may delay taking out loans for homes or vehicles.

  • Businesses might scale back investment plans or expansion due to the higher cost of capital.

  • This works as a brake on inflation and excessive credit growth.

3.Aligning with liquidity squeeze

  • The Bank of Botswana recently described a “liquidity squeeze” in the banking sector ().

  • FNBB’s move reflects this tightness: with less money circulating, banks must increase rates to balance supply and demand for funds.

4.Wider impact through the financial system

  • FNBB was the last of the nine major banks to increase their prime rate, following an average hike of 71 bps earlier in May ().

  • This usual industry-wide alignment ensures a level playing field in lending.

5.Signal on monetary policy stance

  • Despite the Bank of Botswana maintaining a relatively accommodative monetary policy, the rise in bank lending rates signals a disconnect between bank behavior and central bank guidance  .

  • This could prompt the central bank to engage banks directly to align lending practices with broader economic goals and ensure credit remains available responsibly.

Implications to watch

Watchpoint

Why it’s important

Loan portfolios

Borrowers may focus on repaying debt faster to avoid higher interest costs.

Inflation & growth

Slower credit growth could help tame inflation but may also suppress short-term economic growth.

Central bank response

Bank of Botswana may push for rate alignment or adjust tools (e.g., liquidity operations) to ensure stability.

Bank profitability

Higher lending rates could initially boost FNBB’s earnings, but defaults might rise if borrowers struggle.

Bottom Line:

FNBB — now at a 7.01% Prime Lending Rate — is responding to tighter liquidity and higher market rates. Borrowers should expect more expensive credit, while businesses and households may exercise caution. The move also signals a divergence from central bank rhetoric, prompting potential policy engagement to balance credit access, inflation control, and economic growth.

Source:

Bwtechzone.com