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Development bank ‘long overdue’


Bereng Mpaki

A CALL has been made for the reestablishment of a development bank to foster the growth of a vibrant private sector in the country.

This was said by entrepreneur and Lesotho Chamber of Commerce and Industry (LCCI) member Stephen Monyamane in an interview with the Sunday Express in response to Parliament’s Portfolio Committee on the Economic and Development’s review of the national budget.

In its review of the budget titled “Consolidated Report on the Annual Budget and Estimates of revenues and Expenditure for the Financial Year 2016/17”, the Committee calls on the government to “put your money where your mouth is” by fostering the development of the private sector.

“It (private sector) is the only solution and option available to Lesotho (for) generating employment and relieving the government of its huge wage bill, (as well as) guaranteeing a reliable and definite revenue base,” states the committee.

“It is proposed that the government considers establishing a Development Bank, a Property/Housing Bank and attracting more banks into the country to offset the existing monopoly by predominantly foreign banks in the financial sector.”

Mr Monyamane echoed the legislators’ sentiments, saying a development bank was “long overdue” in Lesotho given the need for a private sector to generate employment and generate revenue for the government through taxes.

A development bank is a financial institution dedicated to fund new and upcoming businesses and economic development projects by providing equity capital and/or loan capital.

The concept of development bank is not a new thing in the country, as the Lesotho Agricultural Development Bank was established in the late 1990’s before collapsing in 2000 after lenders defaulted on repaying the institution.

He said entrepreneurs had no choice but to approach commercial banks for business loans.

“However, commercial banks are not interested in lending money to businesses but mostly cater for personal loans, “said Mr Monyamane.

“A development bank would not only be controlled locally, unlike most of our commercial banks, but would also ensure that interest rates charged on loans are lower because they assess risk differently from commercial banks.”

He said development banks understood the nature of the business environment and would be more lenient in their terms of lending to enterprises.

The entrepreneur also stated that the establishment of a development bank should be an initiative of the private sector for it to be sustainable. The role of the government, he said, would be to create a suitable environment by enacting laws and formulating relevant policies.

“Currently there are no adequate laws and policies in place to facilitate the formation of a development bank in the country. We need that for the development of the financial sector,” Mr Monyamane said.

“The issue of defaulting would be sufficiently addressed nowadays because we now have a national identity system which would reduce identity fraud, and we also have a credit bureau to check the credit history of a potential borrower. Added to that, there is also an improved land tenure system that can help to easily trace potential defaulters.”

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