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Rural Finance and Enterprise Support Project

Rural Finance and Enterprise Support Project

At the time of this project, the return of large numbers of unemployed miners from South Africa to Lesotho’s rural areas was putting increasing pressure on the land and the environment. It was necessary to expand opportunities for people to earn incomes outside agriculture. At that time half of all poor rural families, and 60 per cent of women, depended on off-farm activities for income. The project demonstrated the potential for mobilizing savings among rural households, and it pioneered the development of rural savings and credit groups as financial intermediaries between rural people and formal financial institutions.

Designed to be national in scope, the project targeted poor households that were without food security either because they were landless or had little land and/or no off-farm incomes. Crop yields in the area are low, although they are higher than elsewhere in the country. The potential for large-scale irrigation is limited, but existing sources of water (mainly streams) can be used to irrigate small plots. About half of the households have some livestock, although distribution is uneven.

To achieve its objectives of increasing household incomes and food security, and improving the standard of living of rural poor people, the project:

  • reoriented financial institutions, such as the Central Bank, the Lesotho Agricultural Development Bank and three commercial banks and other financial institutions, to serve the interests of poor rural people better and on a sustainable basis
  • provided training and technical support to members of rural households to enable them to engage in both on-farm and off-farm small-scale rural enterprises.
  • improved poor people’s access to rural financial services by promoting savings and credit groups and linking them with formal financial institutions, particularly targeting people whose requirements are too small to be serviced by formal institutions
  • improved markets and marketing facilities for rural communities

The experience gained shows that mobilizing and forming groups is a time-consuming and painstaking process. It challenged the idea that the private sector can be relied on to deliver financial services to poor people without clearly defined risk-sharing arrangements supported by the Central Bank.

 

Source: IFAD


Status: Closed

Country

Lesotho

Approval Date

02 December 1993

Duration

1993 - 2002

Sector

Research/Extension/Training

Total Project Cost

US$ 6.52 million

IFAD Financing

US$ 4.06 million

Co-financiers (Domestic)

Domestic Financing Institutions US$ 1.59 million

Financing terms

Highly Concessional

Project ID

1100000468


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