Release number IFAD/47/07

Rome, 05 November 2007 – A US$8.7 million IFAD-supported programme will help about 37,000 poor rural people in Lesotho have better access to a broad range of financial services. The aim of the programme is to make it possible for poor rural people to invest in on-farm or off-farm microenterprises and build their financial and household assets.

The US$10.7 million Rural Financial Intermediation Programme is supported by a US$4.35 million loan and US$4.35 million grant from IFAD. The agreement was signed in Rome on 8 October 2007 by the Ambassador of the Kingdom of Lesotho to Italy, Jonas Sponkie Malewa, and the IFAD President, Lennart Båge.
“This new programme will help poor rural people access financial services that respond to their specific needs,” said Fumiko Nakai, IFAD’s country programme manager for Lesotho.
“Poor people who are capable of engaging in income-generating activities will have better access to capital for investment,” she said. “And very poor people with meagre incomes will also benefit because they, too, will be able to gradually accumulate savings and have places in which to safely deposit those savings.”
“The programme will help formal and informal financial institutions develop a range of financial services, including money transfer and insurance services.”
The programme will also establish a regulatory framework for non-bank financial institutions and enhance the supervision capacity of the Central Bank of Lesotho. The programme was developed in close collaboration with the government and key stakeholders, including the Central Bank of Lesotho and the Lesotho PostBank.

Most of the Basotho have neither reliable nor regular access to financial services. Formal financial institutions are located mainly in the capital and a few major towns, and there is no microfinance institution in the country.

When people need to borrow money, many depend on relatives or friends or on the services of informal local groups and moneylenders who charge exorbitant interest rates. As a result, they tend to borrow only in emergency situations and are unlikely to seek loans to develop businesses or invest in their farms. In addition, the physical distances separating rural people from financial institutions, and unfavourable terms and conditions such as minimum balance requirements and fees for depositing money, also make it difficult for poor rural people to access reliable and safe saving facilities. 

As a formal financial institution, the Lesotho PostBank is expected to be a key player. The PostBank, currently owned by the government, started operations in 2005 with the aim of providing financial services to people who do not have access to formal banks. 

“The programme will help transform PostBank into a professionally managed institution that operates on business principles while at the same time maintains its social mandate,” said Nakai. “It will also help the government develop regulations and policies that encourage efficient and sustainable financial services.”
IFAD works with the government and other partners to develop and support long-term initiatives to strengthen the livelihoods of poor rural people in a sustainable manner. IFAD has supported agricultural and rural development in Lesotho since 1980 by investing in seven programmes and projects to reduce poverty in the country’s rural areas. With this signing agreement, IFAD’s support to Lesotho now totals over US$50 million.

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IFAD is an international financial institution and a specialized United Nations agency dedicated to eradicating poverty and hunger in rural areas of developing countries. Through low-interest loans and grants, IFAD develops and finances programmes and projects that enable poor rural people to overcome poverty themselves. There are 191 ongoing IFAD-supported rural poverty eradication programmes and projects, worth a total of US$6.6 billion. IFAD has invested US$3.1 billion, with cofinancing provided by partners including governments, project participants, multilateral and bilateral donors. These initiatives will help about 82 million poor rural women and men to achieve better lives for themselves and their families. Since starting operations in 1978, IFAD has invested US$9.8 billion in 751 programmes and projects that have reached more than 310 million poor rural women and men. Governments and other financing sources in recipient countries, including project participants, contributed US$9.2 billion, and multilateral, bilateral and other donors provided another US$7.2 billion in cofinancing.