Credit guarantee scheme begins to pay off

MASERU – AT the height of the Covid-19-driven lockdowns in 2020, Chaka Mosese’s liquor store in Maseru almost went under.
With Mosese’s business pinned against the wall, it was the Lesotho National Development Corporation (LNDC) that came to his aid when it gave him a loan under its partial credit guarantee scheme.

The loan ensured that Mosese’s business survived during those difficult days when liquor stores were shut down in an attempt by the government to contain the spread of Covid-19.
While the move went a long way in disrupting the spread of the disease, the lockdowns were catastrophic for small businesses such as Mosese’s that relied on daily patrons for support.

Mosese told a press conference organised by the LNDC last Friday that his business was thriving until Covid-19 hit in 2020.
He was speaking to showcase how the LNDC-run partial credit guarantee scheme has had a positive impact on local small businesses.

With his business wobbling, Mosese said he at first approached local banks seeking an urgent loan.
He was turned away because he did not have security.

Fortunately, he was advised to approach the LNDC which guaranteed the loan.
Mosese says the loan boosted his liquor business which saw it grow to a point where he was able to buy most of his drinks directly from the manufacturers in South Africa.

He got a golden opportunity to begin delivering Coca-Cola drinks in Lesotho. That venture created about 30 jobs for the locals, he said.
With access to manufacturing markets, Mosese says he began buying washing soap and cooking oil which he was now delivering to retailers and individuals at cheaper rates.

Mosese said he has been working so hard to ensure that the business is in a position to generate enough money to repay the loan.

“I have never failed to pay my monthly instalment,’’ he said.

He urged other entrepreneurs to take this chance to enhance their businesses and boost their productive capacity.
LNDC Chief Executive Officer, Molise Ramaili, said the scheme was developed to address perceived market failures.

He said however, due to the devastating effects that emanated from Covid-19, the scheme was modified to meet market needs in Lesotho.
This was to mitigate those effects by expanding guarantee cover from the previous 50 percent to 75 percent of the loan amount.

Ramaili said the scheme has expanded eligibility to all locally registered businesses.
He said as one of the scheme conditions, the intervention shall be a temporary solution effective for five years from the official launch.

He further said money obtained through this scheme should not be used to repay other loans.
He said the scheme is achieving its intended objectives.

He said the unit is currently offering the Partial Credit Guarantee Scheme, Equity Finance, Quasi-Equity Finance as well as the Project Preparation Facility.
The General Manager of the Development Finance at the LNDC, Semethe Raleche, said they have been working with the Lesotho Post Bank, Standard Lesotho Bank, Nedbank Lesotho as well as the First National Bank (FNB).

The Ministry of Trade’s principal secretary, Francis Sefali, said the government had made a commitment to support the scheme due to the impact Covid-19 had on local businesses.
Sefali said the government is the biggest employer and public expenditures account for more than half of the country’s Gross Domestic Product (GDP).

He said Lesotho’s private sector is limited, as are opportunities for employment.
Hence for growth and development, “there is a need for a structural shift in the country’s growth driven by government spending where the private sector drives economic activity and job creation”.

“PCG is one of the mechanisms through which the Government of Lesotho seeks to boost projects in productive sectors,” Sefali said.

“This is to provide the much needed financial muscle by providing financial backing to secure loans from commercial banks in the country,” he said.

Sefali said it has been determined that access to finance has proved to be the biggest impediment across at least three productive sectors.
He said for small business start-ups, the problem is lack of collateral and bankable proposals for long-term investments.

“The challenge is that banks do not have interests to finance long-term investments,” he said.

“All these challenges have been duly noted by the Government of Lesotho, and today is testament to advances it has made in addressing these challenges,” he said.

The scheme was launched and implemented in 2011 and modified in April 2020 to respond to the Covid-19 pandemic.
The government set aside M350 million for the partial credit guarantee scheme in 2020. However, only M136 million has been used so far, according to the LNDC.

The LNDC says only 112 businesses have benefited from the scheme so far.

Refiloe Mpobole