Majoro revamps partial credit guarantee scheme



MASERU – Prime Minister Dr Moeketsi Majoro has unveiled the first series of three financial instruments designed under the Lesotho National Development Corporation’s (LNDC) Development Finance Unit, seeking to assist micro and medium enterprises and other Basotho-owned businesses by providing the collateral that banks require before lending money. This during a ‘Business-Government Consultation’ in Maseru on Thursday, during which Majoro outlined a restructured Partial Credit Guarantee (PCG) scheme that comes with a total backing of close to M410 million – including M350 million pledged by government for the PCG, with the balance financed through the LNDC balance sheet.

The partial credit facility was established by government in 2011 as the Partial Credit Guarantee Fund, beginning operations in 2012. In July of 2016 the Director of Planning Unit in the Ministry of Finance, Habofanoe Makopela, reported that government has through the Fund assisted 128 businesses to access loans from banks through its; at the time he said 19 businesses had already settled their loans since inception of the project in 2011.

The Fund has leveraged M34 million worth of lending to small and medium enterprises since its inception. Government had set aside M50 million as a guarantee for banks in the event beneficiaries fail to settle their loans under the Fund. The revamped PCG’s instruments were launched as a means of offering financing solutions to support private sector led industrial development and broader economic diversification, and to alleviate the effects of COVID-19 pandemic.

It has been restructured, simplified and scaled up to respond to effects of COVID-19 on the economy and to improve its impact and reach,  expanding guarantee cover from the previous 50 percent to 75 percent of the loan; it waives all fees; covers all sectors and business activities except normal negative list activities. The guarantee amount will also increase to a maximum M8 million, from M5 million previously, and the minimum loan supported is M200 000. This instrument is accessed only through applying for loans directly to participating commercial banks, which in turn approach the LNDC on behalf of their clients.

The PCG Quasi Equity instrument will provide innovative finance to fast growing local companies which promise high development effects, mostly in agriculture and manufacturing. It will be offered as a standardised profit-sharing arrangement with up to 2 years of moratorium. While the Project Preparation Fund component is designed following a trust fund model where government and the LNDC contribute funding together with external partners, and the LNDC acts as the administrator.

Applications for both the quasi equity and project preparation funding can be applied for Online on the LNDC’s website. No in-person or hard copy applications will be accepted. This initiative is the first product launch by LNDC’s Development Finance Unit since the unit was established in 2018 after the approval of the LNDC Strategic Plan of 2018-2023. The LNDC is mandated, through an act of parliament, to initiate, promote and facilitate the development of manufacturing and processing industries, mining and commerce in a manner calculated to raise the level of income and employment in Lesotho.


Leave a Reply

Your email address will not be published. Required fields are marked *