High charges impede financial inclusion: WB
HIGH charges for opening and maintaining bank accounts work against the principle of financial inclusion and discourage savings.
This was said by World Bank consultants in an interview with the Business Journal earlier this month on the sidelines of their technical assistance programme meant to foster financial inclusion in Lesotho.
The programme, which was undertaken in Maseru, also sought to strengthen the operations of financial services and establish a consumer protection framework among other objectives.
The head of the two-man mission, Marc Shryver, said many people in Lesotho were still keeping their monies at home due to high banking charges. By so doing, he said, they ran the risk of losing their money to theft or fires among other hazards.
“During our stay in Lesotho, we went to visit the Savings and Internal Lending Community group which is an initiative of the Catholic Relief Services and Caritas Lesotho,” said Mr Shryver.
“The group has about 17 members and we found that they were keeping large sums of money with them.”
He added: “For instance, there was M40 000 on the table. When we left, they had to stash it somewhere so that nobody would steal it. And that is a high risk they are running.
“And when we asked them why they did not deposit their money in a bank so it can be safely protected, they said they were deterred by the very high bank fees.”
Mr Shryver said such problems could be resolved by a consumer protection unit.
He also indicated that limited financial inclusion in Lesotho was hindering the development of the country.
“The bridge between the informal and formal sectors is wide due to the high costs of accessing financial services and, in turn, financial inclusion.
“It, therefore, hinders the overall goal of developing Lesotho’s economy and financial services.”
For his part, the Central Bank of Lesotho’s Head of Non-Bank Supervision, Bafokeng Noosi, said financial inclusion needed to be balanced with preventing abuse of such services as loans.
“We are basically trying to develop the sector to respond to the challenges alluded to by Marc,” he said.
“Some of the challenges include indebtedness, whereby public servants are taking more loans than they can service.
“So while we see the need to bring more people into the formal sector, we are faced with the challenge of misuse by those already included leading to over indebtedness.”
During their tour of the country, the mission touched base with government ministries such as Finance and Small Business Development along with government agencies as well as financial institutions.