Financial Inclusion in Lesotho

Program Development Objective (PDO)

The objective of this technical assistance program is to support the government and the Central Bank of Lesotho in expanding financial inclusion in the country, specifically by strengthening and deepening the supply of financial services and by establishing a consumer protection framework. 


In an effort to achieve greater national financial inclusion—an agenda item of both the 2020 National Strategic Development Plan and the Financial Sector Development Strategy—the Central Bank of Lesotho has sought technical assistance in addressing issues related to microfinance institutions (MFIs), savings and credit cooperatives (SACCOs), mobile financial services, and partial credit guarantee programs. 

First, Lesotho lacks adequate regulatory and supervisory frameworks for MFIs. Currently, only three MFIs in Lesotho are licensed to provide credit; however, only one of those is operational, and none of the MFIs is licensed to take deposits. Similarly, SACCOs are highly fragmented, poorly managed, and inadequately supervised because the Central Bank of Lesotho has limited capacity for supervision of SACCOs. This limited capacity for supervision means that Lesotho has no a legal foundation for oversight. The legal requirements for banks that use agents are much stricter and more inconsistent than are regulations for mobile network operators that provide mobile money services. Consumer protection is also an area of particular concern, especially because Lesotho lacks the appropriate legal framework. In addition, Lesotho lacks redress mechanisms, and financial service providers are not transparent in their product pricing. Last, Lesotho’s partial credit guarantee programs, which are intended to serve small and medium enterprises, have little effect because of (a) deficiencies in the programs’ design, (b) lack of institutional capacity to implement the schemes, and (c) ineffective governance. 


The project team aims to address these challenges through the following five components:

1.  Strengthening legal, regulatory, and supervisory frameworks for MFIs and financial cooperatives

2.  Strengthening supervision of other non-bank financial institutions

3.  Developing an environment that is conducive to mobile money and agency banking

4.  Developing the framework for financial consumer protection and improving financial capability
     and education

5.  Revamping the government’s partial credit guarantee schemes to improve access of small and
     medium enterprises to financing

Expected Outcomes

The main expected outcomes of the project are as follows: 

1.  Enabling adequate legal, regulatory, and supervisory frameworks for MFIs, which would allow
     high-quality, deposit-taking MFIs to enter the market

2.  Supervising large financial cooperatives 

3.  Supervising non-bank financial institutions (for example, rural savings and credit groups, village
     savings and loan association groups, money lenders, and so forth) 

4.  Creating a legal environment that is conducive to mobile money

5.  Strengthening the framework for financial consumer protection

6.  Improving effectiveness of Lesotho’s partial credit guarantee schemes