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Lesotho Government Takes Step Towards Enhancing Welfare Through Financial Sector Inclusivity

The government of Lesotho has been working tirelessly to connect policy and regulatory dots to fill historical gaps, with the aim of reducing financial exclusion and boosting employment opportunities.

Key Legislation Prepared

To achieve this goal, key legislation including the FSDS, 2012 Financial Institutions Act, Credit Reporting Act, Payment Systems Act, and Insurance Act have been prepared. These laws are expected to play a crucial role in enhancing financial sector inclusivity in Lesotho.

Financial Inclusion Challenges

Despite high levels of financial access, with only 19% of adults not financially served, several barriers remain. These include:

  • Fear of credit
  • Lack of payslips and proof of income
  • Doorstep barriers
  • High costs associated with transaction and savings accounts
  • Lack of mobile money awareness and education

Priorities for Improvement

Experts have identified key priorities for improvement to address these challenges, including:

  • Institutional reform
  • Policies that explicitly address migrant workers
  • Reducing costs
  • Leveraging existing channels

Meso-Level Barriers

At a meso level, socio-economic conditions, physical conditions, and retailer monopoly of money transfers are among the key barriers to financial inclusion.

Customer Perspective

From a customer perspective, negative perceptions of formal players in insurance, lack of tailored products and services, and high charges in the banking sector have contributed to limited adoption of financial services.

Priorities for Poverty Alleviation and Economic Growth

When filtering financial inclusion priorities through the lens of actions most likely to contribute to poverty alleviation and economic growth, three core priorities emerged:

  • Directly improving household welfare
  • Taking small steps towards enhanced growth
  • Leveraging financial sector intermediation to support investment and growth

Government’s Vision for Financial Inclusion

The government has set out a vision for financial inclusion in Lesotho, with five key objectives aimed at increasing access to quality and diverse formal financial services. These objectives include:

  • Increasing outreach and quality of financial services
  • Increasing financial and investment capacity
  • Creating and capacitating inclusive financial service providers
  • Ensuring an enabling regulatory environment
  • Customer education

Expected Impact

The government’s efforts are expected to have a positive impact on the country’s economic growth and household welfare, ultimately enhancing the overall well-being of citizens. As Lesotho continues to work towards achieving its goals, it is clear that financial sector inclusivity will play a critical role in driving sustainable development and prosperity for all.