The Lesotho National Development Corporation (LNDC) is exposed to local banks to the tune of M9 million under the Partial Credit Guarantee Scheme.
The parastatal introduced the scheme in 2011 to assist Basotho-owned companies by providing them with a 50 percent guarantee for business proposals approved by Standard Lesotho Bank (SLB), First National Bank (FNB), Nedbank Lesotho and Lesotho Postbank.
Should the businesses default, LNDC would have to step in and repay the loans to the banks.
“There are about 50 businesses that have qualified for loans under the PCG scheme. Following LNDC’s agreement with banks to provide 50 percent collateral, we have exposure of M9 million and we will have to repay the balance if the businesses fail to settle their loans,” said LNDC Domestic Investment Manager, Semethe Raleche, during the PCGS Forum held in Maseru on Tuesday.
According to Mr Raleche, the majority of PCGS-supported projects obtained their loans through FNB (58 percent) and Lesotho Postbank (34 percent).
“During the last financial year which ended in March, LNDC had an exposure of M3, 571, 581,33 million at FNB while at Postbank, it was M2,743,901,02 million. Our exposure at SLB is M2,457,131,62 million. With regard to Nedbank, LNDC had to pay M992,080,60 for a business that eventually collapsed so we are no longer exposed to the bank,” he said.
He also said FNB had the highest number of supported enterprises (29) with Postbank in second place (17). Nedbank and SLB had two each.
Said Mr Raleche: “To date, FNB has furnished 29 businesses with loans including 19 that were low risk, one medium risk, and two high risk. Postbank has provided financial backing to 17 businesses of which 12 were rendered low risk, one medium and four high risk. SLB has provided one high and one low risk loan to two enterprises while Nedbank provided two loans.
“One of the businesses Nedbank provided with the loan has however, failed while the other one has fully settled its loan.
“Loans classified as low risk are those that have not missed even a single installment. Medium risk have missed one month’s installment and high risk have missed over two months installments.”
He also said 68 percent of businesses were now repaying their loans.
“Only 16 percent of businesses have so far managed to fully settle their loans while 32 businesses that were issued with low risk loans have repaid up to 64 percent of their loans and two businesses that were issued medium risk loans that have repaid four percent. So when we assess the performance of the sum of medium and low risk loans which amounts to 68 percent, we can say the payment of the loans is relatively good,” he said.
He further said the fact that only one business had failed was a clear indication of LNDC’s “strong monitoring and evaluation strategies that have worked towards limiting the collapse of its businesses. We hope to have more low risk and fewer high risk loan facilities that would enable efficient repayment of loans.”
Mr Raleche also revealed the wholesale (47 percent) and retail (19 percent) sectors were the most supported businesses.
LNDC is a government parastatal charged with the implementation of the country’s industrial development policies and promoting Lesotho as an attractive investment location for both foreign and indigenous investors.