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Local bank on the cards

MASERU— A group of Basotho is planning to start a commercial bank that they say will give the foreign-owned banks operating here “a run for their money”. The institution, which will be Lesotho’s fourth and only locally-owned commercial bank, is likely to start operating early next year, according to the group’s ambitious plan.

Kennedy Lefothane, the project’s senior coordinator, said the group will soon start raising money for the project.

The plan, Lefothane said, is to raise M40 million from Basotho within the next three to four months. A trust fund will be opened for investors to start buying shares in the proposed bank, he said on Friday. “Initially we will issue 40 000 shares at M1 000 a share to raise M40 million,” a confident Lefothane said. “Of that amount, M20 million will be deposited with the Central Bank of Lesotho (CBL) as security and the other M20 million will be used as start-up capital”. “We have already started mobilising the funds but we want to give Basotho enough time to start preparing to make their investment into the project.”

Lefothane and his team had a meeting with central bank officials on October 5. Central bank officials told them of the regulatory requirements to start a bank and warned them not to take any deposits until they have been granted an operating licence. On October 7 Lefothane and his colleagues held a public meeting at the Lesotho National Development Corporation to discuss the project. Lefothane, who claims to have more than 25 years of experience in the corporate world, said he is confident Basotho will support the bank by investing and depositing their money with it.

He however admitted that it will be a challenge for the proposed bank to break into the commercial banking sector already dominated by South African giants. Standard Lesotho Bank, Nedbank and FNB have established a strong grip on the Lesotho market. The three banks have a huge backing from their parent companies in South Africa and can easily crush the new entrant. The competition among them in Lesotho is already fierce. But Lefothane believes their size and “perceived” market domination has made them arrogant.

He said the new bank will keep its service charges below those of the established banks to lure depositors. “We plan to make our charges slightly cheaper than those of the three big banks,”Lefothane explained. He said it was the huge service charges levied by the big banks that motivated him and his group to think about starting their own bank. “Basotho have been crying about exorbitant bank charges. We think we have the answer to their problem. “There are a lot of Basotho who have taken their money out of these banks and are keeping it under their mattresses because they are tired of the excessive bank charges.”

Lefothane said he is sure that with “world class services” and “reasonable service charges” the new bank will be able to persuade people to cross over from the established banks. “Besides, these banks have not completely saturated the market. Only 18 percent of the population banks with them,” Lefothane said.“There is still a significant portion of the population that requires banking services but is not getting them. Its either banks are not in remote areas or the people have been scared away by prohibitive bank charges.”

Apart from exploiting the market’s frustration with the bank charges Lefothane also believes that the proposed bank will thrive “on a strong sense of identity”. “Basotho want to own things, they want something of their own. This bank is theirs and they are likely to support it. “Remember this is the first commercial bank that Basotho will call their own and strongly identify with,” he said.

Yet even before the project gets off the ground Lefothane and his group are already reminding people that theirs will not be a bank where people will “get cheap and easy loans”. There won’t be reckless lending simply because the bank is locally-owned. The normal risk assessment, internal controls and other banking practices will be adhered to when giving loans, he said. “We will be a commercial organisation that will be run professionally to deliver value to its shareholders while providing an excellent service to our clients and competitive prices.”

Lefothane said his group had been inspired by the support from the public and other professionals. He said there are local former bankers who have already volunteered to help the project take-off. “We have also received many CVs from many people locally and internationally. They all want to be part of this project.” “We know Rome was not built in one day. We expect to start this bank next year and break-even in two to three years,” he said.

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