he Central
Bank of Lesotho has enhanced its supervisory capabilities in its
drive to establish a sound banking system for the country and to promote
financial stability.
Many of Lesotho’s isolated rural, low-income communities lack the
banks and basic services provided in a formal financial sector. Those
banks which do have branches in rural towns and villages only accept
deposits on the basis that accounts contain a minimum balance of 500
maloti – a sum worth more than $50 and well beyond the means of
a large proportion of the population.
As
a result, there is very little or no lending by banks in the rural areas.
Instead, communities have resorted to informal financial arrangements,
often at a high price and without the safeguards and safety nets that
are part and parcel of a secure banking system.
The
central bank’s response was to put forward a plan for the Rural
Savings and Credit Groups Scheme; a system of group banking under which
small villages are encouraged to club together and deposit their savings
or take out loans on a communal basis. The central bank is willing to
set up a guarantor fund on behalf of small communities applying to commercial
banks for credit.
In a bid to rid the country of illegal financial rackets, which often
end with savers’ deposits evaporating into thin air, a new set
of regulations has been introduced, covering collective investment schemes.
Announcing the move, the central bank issued a statement noting that
the regulations were the first of their kind to be introduced in the
country. “They were made with a view to encouraging the growth
of a capital market in Lesotho, while at the same time protecting investors’
capital from ravages such as fraud,” it added.
The statement emphasised the need for principled administration of funds,
including the maintenance of adequate capital resources to cushion managers’
schemes against possible losses.
The
onslaught against unlawful get-rich-quick schemes demands that people
aspiring to set up or manage a collective investment scheme must be
approved by and registered with the authorities.
Advising the public to “take great caution”, the central bank
warned that funds placed in unregistered savings schemes would not be
protected.
The central bank ruled that managers of collective savings schemes would
have to satisfy a minimum capital requirement of one million maloti.
The intention, it said, was “to dissuade fly-by-night collective
investment schemes”. Trustees or custodians of registered schemes
must maintain capital and reserves worth no less than the initial sum.
The aim is to ensure the transparent and reliable management of financial
funds by requiring savings schemes to submit to regular inspections
by external auditors approved by the authorities and by the publication
of audited statements, the central bank said.
The
crackdown coincides with the central bank’s mandatory duty to maintain
a sound financial system, capable of providing the conditions for balanced,
sustained growth in Lesotho.
Last year, the central bank tightened up regulations governing the sale
and purchase of treasury bonds, which have often been liquidated before
their maturity date. The reform was designed to encourage savers to
keep their bills until the due date, with the ultimate aim of fostering
a “culture of saving”.
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