. . . as Money Month campaign launched
AN increasing number of Basotho are failing to manage their debt responsibly with some credit providers also missing the mark regarding their criteria in affordability assessments.
This is according to Central Bank of Lesotho (CBL) Second Deputy Governor, ‘Mathabo Makenete, who also revealed that 40 percent of the incomes of a significant number of Basotho were being channeled towards loan repayments.
Ms Makenete said this during the launch of the annual public financial awareness campaign Money Month early this week in Maseru.
The campaign, which ends on 31 October 2017, is held in conjunction with financial sector players to equip the public with skills and techniques to better manage their finances.
This year, the campaign was extended from the week of previous editions to a month to enable more coverage of topics and audiences.
Held under the theme “I Take control of my money. Do you?” the Money Month campaign will equip members of the public with knowledge on how to manage money, become wise consumers and manage risks as well as emotions associated with money.
They will also learn about their economic rights and responsibilities, developing a savings habit from an early age in order to cultivate key money managing skills and earning money through development of livelihood skills and entrepreneurial training.
While the Money Month Campaign will be held countrywide, the main activities of this year’s campaign will be held in Mokhotlong where various stakeholders will be addressed between 23 and 27 October 2017.
Among the campaign’s target audiences are public officers, women and youth, trainers of herd boys, the business community, farmers, employers’ associations, students, children and the general public.
Ms Makenete said over-indebtedness and unsecured lending were on the rise in Lesotho.
“One of the main challenges currently facing Lesotho consumers is unwise spending habits, poor borrowing and financial decisions,” she said.
“The consequences of these actions have far-reaching effects on society. As such, it is upon us all to scale up our efforts to equip the public with the necessary personal finance skills.”
For a significant section of the working population, Ms Makenete said, loan repayments took up to 40 percent of incomes.
In general terms, the debt-to-income ratio should be below 36 percent to give room for manoeuvring in the event of unexpected changes to income. The highest the debt-to-income ratio can go is 43 percent.
“Data from the credit bureau is showing us that there is an increase of about two to three months of arrears and actual defaults from these very large loan commitments that we see from our consumers.
“It is also a concern that uncollateralised credit is still a predominantly used form of credit. This is a normally expensive credit which should only be used for short-term emergencies.”
Ms Makenete also indicated that plans were in motion to introduce financial education in the elementary school curriculum starting from January 2018.
“The process of integrating Financial Education into schools curricula for all grades (1-12), is at an advanced stage.
“We have been reliably informed by the National Curriculum Development Centre of the Ministry of Education and Training that financial education will be taught in schools, beginning in January 2018. This will go a long way towards ensuring that our children are financially prudent from an early age.”
On behalf of the Bankers Association of Lesotho, First National Bank Deputy Chief Executive Officer, Mokhachane Mopeli, said financial institutions were keen on equipping their customers with monetary information.
“We all know that when people look at banks they think of us as money lenders. But that is not just the role we play,” he said.
“Yes, we encourage lending but more importantly we encourage responsible lending rather than just flooding the market with debt that is not sustainable.”
Mr Mopeli said banks did not just lend money to customers without assessing the purpose for the loans and affordability.
“For instance, if someone is asking for a home loan, it will be structured to be repaid over a longer time rather than when the money is required for school fees,” he said.
“We strive to make sure that after all loans have been issued, there is still enough disposable income available to still meet other family obligations.”