FNBB is like that farmer who grows both maize and keeps goats. If the rains fail and the maize struggles, the goats are expected to still bring in cash. As economic winds blow harder and the climate gets drier, maybe that acacia in the logo isn’t just a symbol; it’s the business model FNBB needs to stay rooted and resilient in this testing season.
Take a moment to look at the tree in First National Bank Botswana’s (FNBB) logo.
It’s not just there for looks:
- It’s an acacia tree.
- It’s the kind that grows in dry, rocky places where most plants can’t survive.
But it doesn’t just survive:
- It flourishes, spreading wide, deep roots and giving shelter even in the hottest sun.
Botswana’s Economy Right Now is Dry
Diamond money is down, cash is harder to find, and banks are feeling the heat. In this harsh climate, FNBB seems to be doing what its tree symbolises:
- Standing firm,
- Growing strong
- And staying grounded while others scramble.
Money Shortage Hits the Banks
Banks are like shops that sell money. But first, they have to raise the money themselves by attracting deposits or borrowing. They then lend that money to people or businesses and earn from the interest paid back.
But here’s the twist:
With less diamond revenue flowing into the country, there’s less money in banks, which they can use to lend you money. That’s like a shopkeeper running out of stock.
This is what’s happening now:
- Banks are now paying more to get money (stock up).
- In the past weeks, many have passed that cost onto customers by raising loan interest rates.
During the Public Accounts Committee (PAC), Dr Tshokologo Kganetsano, Permanent Secretary at the Ministry of Finance, said:
“We have seen in recent weeks commercial banks increasing their prime lending rates. But those are still way below what they pay for deposits.”
FNBB is yet to increase its lending rate, while all other listed banks have increased even more than 1%.
Dr Kganetsano added:
“The shortage in liquidity (cash) affected banks, with banks now paying up to 15% to retain some wholesale deposits.”
Wholesale deposits are huge sums of money that banks borrow from pension funds and insurance companies. Banks have to borrow money first before they can lend it out.
A Different Root System
The business of banking is to lend out money and earn interest. Most banks in Botswana rely on interest income, the money they make from loans.
But FNBB is different; a tree with two main roots:
- Interest income: like most banks, they earn from loans.
- Non-interest income: money made from services like bank fees, card transactions, and mobile banking.
The Kicker?
While most banks lean heavily on interest, FNBB doesn’t. Analysts argue that this makes it more balanced and less shaky when interest income takes a hit.
The banks are like that farmer who grows both maize and keeps goats. If the rains fail and the maize struggles, the goats can still bring in cash.
Against this background, FNBB investors seem not to be betting on one crop, because it’s built for the dry season.
Based on the above graph by Investor Mail:
- FNBB’s non-interest income has been very stable over the years.
- Even in tough times, it has always stayed above P1 billion since 2020.
- Net interest income has been more volatile and susceptible to interest rate changes and other macroeconomic variables.
If we go back and look at FNBB’s numbers from 2020 to 2023, it shows that for four years in a row, FNBB earned more from banking services (non-interest income) than from lending money (interest income), consistently.
Aiming for 90% Self-Sufficiency
FNBB previously told investors that it wants to cover 90% of its running costs using non-interest income alone.
This is what their CFO, Dr. Mbako Mbo, calls:
“capital-light income”.
According to the company, half of its costs go to paying staff.
Even striking:
FNBB is doing this while it has zero-rated (removed fees on) some services.
At first glance, that looks like they’re giving up income. But it’s actually a smart move. By making some services free or cheaper, investors expect that more people are likely to use the bank.
This is called a volume strategy:
- Make it easier and cheaper to bank, and the sheer number of users makes up for the lower fees.
In economics, they call this price elasticity:
- If they lower the cost and more people use it, they still grow your revenue.
FNBB seems to have mastered this well. This is because in the past years, money from non-interest revenue has always been able to cover expenses.
Is FNBB Really the Tree It Says It Is?
While other banks raise rates and react to pressure, FNBB seems to be playing a longer game. It’s growing its roots deep into communities.
Banking the Unbanked
Part of FNBB’s growth strategy is focused on inclusive banking, reaching people who’ve never had a bank account before. Especially in rural areas or informal sectors.
How?
FNBB has leveraged the CashPlus, its flagship product that allows local business owners to provide basic banking services using a secure mobile banking platform connected to our network, expanding reach to the underserved.
- Over 1661 agents are located throughout the country and in this financial year (ending 31 December 2024), the bank has pivoted towards impact in remote areas, according to the bank.
When more people join the formal financial system, the bank gets more transactions, and communities get better access to financial tools.
For its half-year results ending 31 December 2024, FNBB said:
- Its customer numbers grew 8% over the period to 730,000
- Volumes were also up across all major transaction lines, including eWallet, merchant services, CashPlus transactions and ATM transactions, among others.
More customers = more accounts = more transactions = more non-interest income.
Maybe that acacia in the logo isn’t just a symbol. Maybe it’s a business model.
