The nature of financial inclusion in Lesotho: Challenges and main policy considerations to increase access to and use of quality financial services

Abstract

The scale of financial exclusion remains high, especially among low-income and disadvantaged people in rural and remote areas in Lesotho owing to the concentration of physical financial infrastructure in urban areas, high costs of bank accounts and other financial services, lack of proper documentation, lack of interoperability and lack of a proper financial consumer protection and dispute resolution framework. The deployment of mobile money provided a glimpse of hope, but it also faces significant challenges. Therefore, government authorities, financial regulators and policymakers are engaged in policy and regulatory initiatives aimed at increasing financial inclusion in Lesotho. These comprise the expansion of financial infrastructure beyond urban areas; promoting efficient account-to-account interoperability; and enactment and review of the legal and regulatory framework for payment, clearing and settlement systems, banking and non-bank financial institutions, insurance, pensions and other financial services and products. Other initiatives are the implementation of Lesotho Scaling Inclusion through Mobile Money (Lesotho SIMM) to address the challenges facing mobile money uptake and use in Lesotho and assessing the feasibility of introducing digital financial identity as a unique identifier in Lesotho. The government of Lesotho should also adopt digital payment methods (including mobile money) to increase financial inclusion in Lesotho.