Financial reform and credit extension in Lesotho

Abstract

The study on which this article is based was concerned with establishing whether the lending behaviour of Lesotho's commercial banks in relation to the private sector has changed following the reforms that have been implemented since 1980. The influence of macroeconomic variables on agricultural credit and on private sector lending provided through the existing commercial banks during the period 1980 to 1993 was examined. The results showed a high and significant association between total credit extension and the general performance of the economy. Macroeconomic variables such as returns on financial securities in Lesotho and bonds in the Republic of South Africa, bank discount rates and the interest rates on saving deposits applicable in Lesotho had a key effect on the extension of credit by commercial banks to the private sector. The study concluded that credit extension activities in Lesotho during the study period were sensitive to the macroeconomic environment.

Investigating the determinants of commercial bank interest rate spreads in Lesotho: Evidence from autoregressive distributed lag (ARDL)andnon‐linear ARDLapproaches

“…These financial system reforms were necessitated by such developments as evolving macroeconomic dynamics (e.g., variable inflation rates, the establishment of a central bank, 6 growing overlap in services offered by financial institutions, etc. ), parliamentary legislative initiatives to protect depositors and foster economic development, conversion of the Post Office Savings Bank to the Lesotho Commercial Bank as well as changes in technology that enables a broadening of financial services and geographical areas over which financial services are delivered (Anchang, 2016; Ayaya, 1997; CBL, 2019; Damane, 2019a; Damane et al, 2018; Molapo & Damane, 2016; Mowatt, 2001). Between 2014 and 2018, domestic banks introduced and launched mobile and internet banking services that allow banks' clients to access various financial services remotely.…”

Theory, Practice and DFI Institutional Design: Case of the Lesotho National Development Corporation

“…To extend its banking portfolio, the Lesotho Bank arranged the savings schemes called the Deferred Pay Fund in 1973 with Lesotho citizens working in South African mines. In addition, during the period of the 1960s to 1970s, the economy of Lesotho was predominately driven by the agricultural sector, igniting the need for the GoL to establish the Lesotho Agricultural Development Bank (LADB) in 1976 [2].…”