THE MKM, which was a shameless Ponzi scheme, remains like an albatross around the government’s neck almost four years after the company was shut down by the Central Bank of Lesotho (CBL).
The scheme preyed on Lesotho’s poorest of the poor by promising them outrageous interest rates on their investments.
But like all Ponzi schemes MKM was destined to collapse like a deck of cards. And collapse it did.
When the government finally woke up from its slumber and shut down the scheme in November 2007, hundreds of thousands of Basotho had invested their monies in the scheme.
Almost a quarter of Lesotho’s 1.8 million people still have their monies locked up in MKM as the case drags on at the High Court.
It beggars belief how such an epic swindle could be allowed to happen right under the noses of the CBL authorities.
That such a monumental fraud could take place without the central bank intervening swiftly to restore sanity in the sector will remain a blot on the bank’s otherwise squeaky clean reputation.
The whole nation appeared to be in a state of hypnosis after MKM boss Simon Thebe-ea-Khale lifted his magic wand.
The MKM case also badly exposed the shocking flaws in the central bank’s monitoring and surveillance mechanisms for the financial sector.
It was a huge wake-up call.
Four years down the line the case is still rumbling on at our courts with no quick solution in sight.
Several High Court judges have touched the case, only to abandon it citing various reasons.
Last year Lesotho had to hire a South African judge to come and preside over the case, obviously at huge cost to the fiscus.
We hope we have learnt our lesson.
Never again should we allow such an embarrassing national fiasco to happen under our watch.
It is against this background that we wish to welcome the promulgation of the Financial Institutions Bill 2011 that is currently before parliament.
Parliament must swiftly pass the Bill into law for the national good.
We hope the new law will provide the necessary impetus to crack down on the rampant lawlessness in the financial sector.
We need a semblance of order in that key sector.
In its statement of objects and reasons the Bill says it seeks to empower the commissioner of the financial institutions with “enhanced investigatory powers against entities suspected to be conducting illegal banking or credit business without a valid licence”.
The idea, the Bill says, is to empower the commissioner to act “decisively against conduct threatening the soundness of the domestic financial sector”.
A key aspect of the new law is the strengthening of internal controls within licensed financial institutions.
We think this proposed law was long overdue.
Basotho need the government’s firm hand of protection against unscrupulous businessmen who for years had preyed on the citizens’ desperation.
Consumers and investors need protection against unlawful banking and credit businesses.
The proposed legislation should provide a legal basis to protect Basotho who are trapped in a cycle of debt and poverty.
The government needs to halt the dodgy credit firms that are fleecing unsuspecting and desperate citizens.
Most of these businesses were charging exorbitant interest rates to desperate Basotho until they were stopped by the courts.
With the promulgation of this Bill we think the financial services sector is headed towards better, prosperous times.