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Informal financial markets in Botswana: a case study of Gaborone City

  • Francis Nathan Okurut
  • Thuto Botlhole
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    The present study investigated informal financial markets in Gaborone, Botswana, with specific focus on the terms and conditions for informal credit, its main uses and the target clientele. The study used primary data, and analytical techniques that included descriptive statistics and analysis of variance. The results show that informal lenders give short-term consumption loans consisting of small amounts, charge very high interest rates, use innovative collateral substitutes such as automatic teller machine (ATM) cards plus personal identification numbers (PINs) and valuable household assets as security, and target mainly the non-poor. The paper makes three policy recommendations: an appropriate regulatory framework for the informal financial sector should be developed, interest rates and other charges should be systematically disclosed so as to encourage competition and reduce the high interest rates, and there should be legislation against the use of ATMs and PINs as security.

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    Article provided by Taylor & Francis Journals in its journal Development Southern Africa.

    Volume (Year): 26 (2009)
    Issue (Month): 2 ()
    Pages: 255-270

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    Handle: RePEc:taf:deveza:v:26:y:2009:i:2:p:255-270
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