The Central Bank of Lesotho (CBL) has launched the Rural Savings and Credit Scheme with the objective of making credit accessible to rural associations that have, for a long time, not had access to credit from the formal banking sector. The scheme is now at the stage of implementation with benefits pouring into the hands of rural communities. The scheme, in its operation, has incorporated the linkage banking programme which essentially encourages groups to forge links with the commercial banks. It is meant to promote engagement of groups in income generating activities, thereby instilling a sense of ownership, self sustenance, skills development, willingness to run a business and ultimately, promotion of growth.

In its endeavour to promote the “unbankable sector” i.e the informal groups, the Central Bank developed and put into operation a policy that advocated rural financial intermediation in the country. The policy also took along the concept of linkage banking which encourages savings mobilisation and credit based lending. Credit extended to these groups therefore enables them to set up economic activities that generate income. Small loans ranging from M5,000 to M50,000 are granted to qualifying groups on the basis of solidarity, commitment, diligence, peer and social pressure.  

CBL has undertaken countrywide public sensitisation efforts to introduce the scheme to rural based associations engaged in self sustaining economic activities. Credit to groups is extended by the commercial banks subject to the following eligibility criteria. 

-           Registration under the Societies Act no.20 of 1966 as amended. 

-           Group existence for at least six months with proof of holding and operating an active account for a period of six months. Sufficient proof of the group’s existence for the last two years should be provided. 

-           Membership within a group should comprise Basotho citizens or at least 80%  leaving 20% for non-citizens resident in Lesotho for at least two years’ continuous period. 

-           At least 80% of a group’s membership should not be formally employed.

The scheme kicked off in April 2005, and so far three groups have obtained credit from commercial banks under cover and guarantee of the scheme. These groups come from the districts of Berea and Quthing, respectively. The total loan portfolio guaranteed by the CBL, in this regard, is M81,050. More applications for finance are under process with appraisal at different stages of development. The scheme is gaining popularity among the rural communities with a bias towards poultry, piggery, vegetable production, school feeding programme, tapestries, wool and mohair production. The majority of these activities target local markets and local participation is on the high side. Rural communities, Hurry!  The ball is now in your court

Chief, Public Relations                                                                                                                             2005 August  02