7 July 2018

Lesotho: Business Calls for Finance Institution for SMME's

THE Private Sector Foundation of Lesotho (PSFL) wants the government to establish a micro-financing organisation that will help small businesses access the necessary funding.

PSFL chief executive Thabo Qhesi said establishment of such an institution would directly offer credit to small businesses.

"Government should take a leaf from Botswana which has an equivalent of BEDCO called Local Enterprise Authority (LEA) and also Citizen Entrepreneurial Development Agency (CEDA) for financing MSMEs," Mr Qhesi said.

Established in 2001, CEDA addresses the need for coherent and holistic support for the development of small, medium and large-scale enterprises through the soft window and package offered through the subsidiaries.

It offers funding for capital expenditure, stock or working capital in new and existing business ventures. It also offers training and mentoring for new and seasoned entrepreneurs and business advisory services to entrepreneurs in various skills as identified through needs assessment during project monitoring.

Mr Qhesi recently returned from the Southern Africa Regional Integration Stakeholder Forum (SARISF), held in Malawi from 11 to 13 June 2018.

The SARISF highlighted the plight of micro, small and medium enterprises (MSME's) in the region and Mr Qhesi said micro-finance organisations can give MSME easy access to loans.

Mr Qhesi said the available government intervention, which is done under the Partial Credit Guarantee Fund (PCGF) is lengthy and involves duplication of efforts.

The PCGF is administered through the Ministry of Small Business Development, Cooperatives and Marketing.

Mr Qhesi said some commercial banks are however, not embracing the initiative as expected and that has hindered entrepreneurs' access to finance.

Under the PCGF, entrepreneurs are required to submit business plans to the ministry which assesses them before forwarding them to the commercial banks. The banks then subject the applications to internal assessment processes before deciding whether or not to grant a guaranteed loan.

Introduced in 2012, the scheme was meant to ensure access to credit finance to small businesses through sharing the collateral burden between entrepreneur and government on a 30-70 percent ratio for beginners and 50-50 percent for existing businesses.

Mr Qhesi said the government should establish a micro-financing entity to fund businesses that would have been given technical support by the Basotho Enterprise Development Corporation (BEDCO).

For his part, Principal Secretary in the small business ministry, Lerata Pekane, said they fully agree with PSFL's sentiments.

"Establishment of such institutions is in our thoughts and we totally agree with PSFL as we also happened to attend the same forum regional forum," Mr Pekane said.

He said they would soon commission a study on the possibility of developing such institution in the country with the possibility of roping in the Lesotho PostBank, which is government-owned.

He further indicated that if the local banks could be in the same wavelength with the government with regards to supporting small entrepreneurs, there would be no need to establish such public institutions.

Mr Pekane said his ministry is promoting the PCGF, which has seen its up take improve dramatically.

He said in the past six years of its operation, the fund assisted entrepreneurs to access a total of M31 million. However, in the past eight months the fund has helped to disburse M15 million to the private sector.


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