By: Mpho Shelile
Maseru – The Central Bank of Lesotho (CBL) recently reviewed the outcomes of the first Financial Sector Development Strategy (FSDS), a transformative initiative aimed at strengthening Lesotho’s financial sector. Running from 2013 to 2019, this strategy sought to enhance financial inclusion and improve access to financial services across Lesotho.
The FSDS, launched by the CBL in partnership with the government and supported by the World Bank, tackled structural challenges hindering economic growth and financial inclusion in Lesotho. Key focus areas included boosting financial literacy, refining regulatory frameworks, and fostering digital financial inclusion, with the aim of empowering Basotho and stimulating sustainable economic growth.
In her opening remarks at the review meeting, P.S of the Ministry of Finance, Ms. Nthoateng Lebona, praised the efforts of the CBL and the World Bank in supporting the FSDS. “As we move forward with FSDS II, I hope we can build on our initial foundation, addressing the challenges faced in the first FSDS to drive even greater progress,” she stated. Ms. Lebona also emphasized that while Lesotho has achieved a 91% financial inclusion rate, further innovation and private sector engagement are critical to reaching the nation’s financial goals.
The FSDS achieved notable milestones in extending financial services to the unbanked and underbanked, particularly in rural areas. According to Mr. Bafokeng Nosi, Director of Financial Inclusion and Sector Support (DOFIS), the FSDS worked to expand affordable banking services and alternative financial products tailored to low-income individuals. Key objectives included increasing financial access, promoting savings, mobilizing resources, and improving financial sector skills.
Mr. Nosi further states that under the FSDS, Lesotho’s financial inclusion rates increased from 79% to 91%. Small, medium, and micro-enterprises (SMMEs) also saw a rise in financial access, with an improvement from 65% to 88%. Despite these gains, Mr. Nosi noted significant hurdles, including limited training, frequent leadership changes, and reliance on outdated laws, which affected strategy implementation.
A central focus of the FSDS was establishing a stable regulatory environment to safeguard the financial sector. The CBL collaborated with regulatory bodies to create frameworks that protect consumers and mitigate systemic risks. Financial literacy programs, spearheaded by the CBL, equipped Basotho with the skills needed for responsible financial decision-making, promoting a culture of saving and informed borrowing.
Digital financial services were another critical component. By supporting mobile banking, digital wallets, and fintech innovations, CBL expanded financial access, especially in remote areas where traditional banking infrastructure is limited.
Notable accomplishments of the first FSDS are that mobile banking agents and ATMs were introduced in underserved areas, bridging the urban-rural gap and bringing essential banking services to previously unbanked communities.
The FSDS also fostered the formalization of microfinance institutions, crucial for serving low-income individuals and small businesses, promoting entrepreneurship, and empowering marginalized groups.
FSDS I has also increased mobile money usage marked a shift toward cashless transactions, enhancing financial security and convenience for Basotho.
Improved transparency in loan agreements and a formalized complaint, process helped build trust in the financial sector. Through public campaigns and workshops, the FSDS improved financial literacy, empowering Basotho to make informed financial choices.
The CBL’s review highlighted several challenges that hindered the full impact of the FSDS; being limited limited digital and physical infrastructure in remote areas made expanding financial access challenging, particularly due to inadequate connectivity. In areas with lower education levels, financial literacy challenges restricted some communities from effectively utilizing financial services.
The rapid growth of digital finance presented regulatory challenges in adapting frameworks to secure new digital products and maintain financial stability.
Building on these lessons, the CBL outlined priorities for FSDS II to foster a more inclusive and resilient financial environment aligned with Lesotho’s long-term development goals, Expanding the network of banking agents and digital services to reach more remote areas.
CBL is working to update its regulatory guidelines as part of the second Financial Sector Development Strategy (FSDS II).
This update aims to address the challenges and opportunities presented by new technologies and changing market conditions. CBL’s goal is to ensure that regulations are adaptable and effective in managing risks linked to digital innovations, like mobile payments and online banking, and other evolving financial products by strengthening regulatory frameworks.
In his closing remarks, CBL Governor Dr. Maluke Letete acknowledged the support from the World Bank and other stakeholders, while stressing the importance of continued efforts to bridge remaining gaps. “We need to work hard to evolve our financial systems alongside market trends and close the gaps identified in the first FSDS,” he stated, urging Basotho business owners to demonstrate accountability in using financial resources responsibly.
CBL’s reflections on the FSDS emphasize both the progress made and the ongoing challenges in building a more inclusive financial sector in Lesotho. By addressing structural barriers, advancing regulatory standards, and embracing digital transformation, CBL has paved the way for a resilient financial system that benefits all Basotho.
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