FINANCIAL SERVICES AMONG RURAL AND LOW-INCOME POPULATIONS

Drawing from previous studies and fieldwork, this chapter presents the state of financial services among rural and low-income populations from a people-centric perspective within a wider context of Lesotho. It examines their economic activities and motives. On the basis of this, the chapter further distils lessons, identifies gaps and opportunities for financial inclusion through mobile financial services. This is done with a view to lay a foundation for understanding a holistic mobile-based micro-financial model recommended (as outlined in chapter 6). In the last ten years, the FinMark Trust has conducted a number of studies related to Lesotho’s economy and the state of financial inclusion.
In line with the government of Lesotho, the Trust defines financial inclusion as the “extent to which the adult population in the country engages with financial products and services, such as savings, transaction banking, credit and insurance, whether formal or informal.”42 One of the major crossing cutting findings is that the urban areas are more financially included as compared to the rural areas. The banking footing is wider in the urban areas and selected town centres in the rural districted. 68% of the adult population resides within 20km of a bank branch or ATM.

Furthermore, FinMark studies revealed the hybridity and plurality of Lesotho’s economy. Both in the urban and rural areas, people depend on formal and informal financial services while their economic activities follow a similar formation which combines formal and informal sources of income. For example, the 2014 MAP study established that 7o% of the formally included adult populations are connected to some informal financial products while 62% rely on informal financial services with insurance recording the highest amongst both rural and urban dwellers.44 A more recent FinScope survey of Micro, Small and Medium Enterprises (MSME) established that there are 76 068 MSME owners across the country. 82% of the total MSMEs are informal enterprises.45 The government of Lesotho defines MSMEs in terms of employment, ownership, annual turnover and form of business (form or informal). For instance, a mirco-enterprise (97%) would employ between 1-5 people; a small enterprise (3%) between 6 and 20 people and a medium enterprise (0.3%) between 21 and 50 people.
Results for the current study builds on and follow alone similar patterns. This chapter presents major players (formal and informal) for supply of financial services among the rural and low-income population in Lesotho, and the prevalent types of transactions undertaken. It further determines sources of income and major spending drivers (social and economic) within the communities. These are presented in a matrix table of consolidated findings from documentary and digital sources (primary and secondary literature), study sample, ethnographic observations, interviewed representatives of various associations and non-governmental organisations, financial institutions, stakeholders and MNOs.

Major Financial Service Providers among Rural and Low-Income Populations

Rural and low-income populations depend on both formal and informal financial service providers (see Table 3.1 below), particularly the latter. Informal financial service providers are mostly self-organised credit/insurance schemes and voluntary associations. Despite the importance of self-organised associations in the everyday lives of the people, there is little data pertaining to their prevalence and numbers across the country. It is also difficult to track their existence because they are characterised by cyclical periodic ‘ups and downs’. The 2014 MAP report demonstrated that 62% of the adult population uses informal financial services while 20% relies mostly on informal services. 16.6% borrow from formal institutions and 34.4% save with financial institutions. 62% of the adult populace have access to insurance while about 419, 289 adults are members of burial societies (formal and informal).

Formal Financial
Service Providers
Types of
Transactions
Informal Financial
Service Providers
Types of
Transactions
MNOs
.
Airtime Advances
.
Unregistered
Micro-Lenders
Micro-loans
(Borrowings)

Registered Selforganised

Economic Groups

(Cooperatives, Associations and
Rotating Credit Schemes)

Micro-loans

(Borrowings)

Deposits and Savings
.

Unregistered Selforganised

Economic Groups

(Mutual aid groups, Rotating Credit Schemes)

Micro-loans

(Borrowings)

Deposits and Savings
.

Selected Insurance Companies

Funeral Cover

Employers

Micro-loan Advances

Registered

Micro-Lenders

Micro-Loans

(Borrowings)

Kinship

Support

Small-scale temporary

Relief borrowing, Remittances

Selected banking and saving financial
institutions and cooperatives

Micro-loans
(Borrowings)
Deposits and Savings

Community
and extended
family Support

Small-scale
temporary
relief borrowing

Translate »