MASERU — The Lesotho National Development Corporation (LNDC) says it has set up a credit guarantee scheme to help Basotho-owned private enterprises with finance.
In a statement to the media, the LNDC said the new scheme seeks to assist the small, micro and medium enterprises (SMME) sector.
LNDC chief executive officer Peete Molapo said the scheme will work with commercial banks whereby the banks will share risk with the corporation.
Projects that need assistance through this scheme will be expected to apply directly to the banks.
The banks will in turn apply for guarantees from the LNDC.
The LNDC said it will try to bring to an end the reluctance of banks to give loans to entrepreneurs.
The LNDC said the credit guarantee scheme will be for businesses with a turnover of less than M2 million per annum.
The banking sector in Lesotho has been reluctant to finance the SMME sector.
“Although commercial banks in Lesotho are very liquid, they do not extend credit to the local private sector as they should, due to the commonly cited problem by banks that there are no bankable projects due to high risk and administration costs,” said the LNDC.
The corporation said it wanted to end this state of affairs by acting “as a catalyst to unlock loan facilities from banks”.
“(The) LNDC is hoping to mitigate risk to encourage banks to lend to Basotho-owned businesses and improve the investment climate especially for the local private sector,” said the LNDC.
The objectives of the Enterprise Development Framework, which is guiding the new scheme, are to facilitate access to finance from commercial banks by the private sector.
It also seeks to promote the export sector and generate employment.
Molapo said the scheme will start operating as soon as the government approves it.
The LNDC was set up in 2006 to promote direct investment and local entrepreneurship.
Its mandate is to initiate, promote and facilitate the development of the manufacturing and processing industries, the mining and commercial sector and to raise the level of income and employment in Lesotho.
It also seeks to promote Lesotho as an attractive investment destination for both foreign and indigenous investors.