Maseru, 03 November 2016: FinMark Trust (FMT) in conjunction with the Ministry of Small Business Development, Cooperatives and Marketing; and the Ministry of Finance released the results of the FinScope Micro, Small and Medium Enterprises (MSME) Survey Lesotho 2016 survey results today. This was the first FinScope MSME Survey conducted in Lesotho. The FinScope MSME Survey, developed by FinMark Trust, is a research tool to assess financial access in a country and to identify the constraints that prevent financial service providers from reaching the financially under- and un-served MSME owners. The FinScope Survey is a nationally representative survey of how MSME owners started, operating and growing their businesses and how they manage their businesses’ financial interest. It also provides insights into MSME owners’ attitudes and perceptions regarding financial products and services. FinScope MSME Lesotho involved a range of stakeholders engaging in a comprehensive consultation process, thereby enriching the survey. To date, FinScope MSME Surveys have been conducted in seven countries including Lesotho and one MSME survey is currently underway in Swaziland. The survey was carried out under the auspices of the Ministry of Finance in conjunction with FinMark Trust and jointly funded by FMT and United Nations Development Programme (UNDP). The study was based on a sample of 2 182 face-to-face interviews which were conducted from September 2015 to February 2016. Micro, Small and Medium Enterprises are defined by the number of employees, annual turnover and legal structure according to the “MSMEs policy for Lesotho” approved by the micro-businesses (with 1 to 5 employees including business owner), as well as small-businesses (6 to 20) and medium-size businesses (21 to 50 employees). For the purposes of this survey, the term MSME includes ‘informal businesses’ which refers to enterprises that are not registered with the relevant institution within Lesotho and are included in the MSME definition.

Small Business Profile

The MSME sector is crucial to the development and sustainability of the Lesotho economy. A few notable results show that the sector contributed to the economy through the following: Job creation – there are about 76 000 business owners in Lesotho, employing 118 000 people who were working in the sector (including owners) at the time of the survey. Youth employment/empowerment – 32% MSMEs owners in the sector are 35 years or younger and employ around 37 000 employees who are 30 years of age and younger. Poverty alleviation - 70% of MSME owners exclusively rely on their businesses as sources of income and 45% earn less than 2000 Maloti per month – equivalent to about US$138. Furthermore, the role of survivalist businesses is to act as a buffer against slipping deeper into poverty, thereby reducing individual and household vulnerability. The majority of MSME owners do not have any employees (83%). The remaining 17% of MSME owners (=about 13 000) employ a total of 55 000 people and around 60% of employees are full-time employees (32 368). According to the survey, the MSME sector in Lesotho is largely (52%) driven by wholesale, retail and agriculture. Around 30% of MSME owners claim to work in the wholesale and retail sector mainly selling goods/services in the same form (i.e. do not add value). About 1 in 4 MSME owners (22%) reported to operate in the agriculture sector, largely (53%) rearing livestock with only 15% growing crops. Another 10% and 9% of MSME owners claim to work in accommodation and food services, and manufacturing respectively. MSMEs in Lesotho are relatively established; majority (64%) reported that their businesses are more than 3 years in operation. In total, 18% of MSME owners reported that their businesses are registered. Of the registered MSMEs, 82% is owned by individuals (sole proprietors), 6% are companies and 5% are in partnership. In terms of operating location, the study indicated that 61% of small businesses operate from residential premises, with 18% operating from the street and/or pavement. The report shows that apart from access to, and the cost of finance there is an overall lack of business sophistication in the MSME sector in Lesotho. Around 45% of businesses are classified as least sophisticated (an estimation of 35 000 businesses), followed by 31 000 (41%) emerging businesses. Only 11 000 (14%) businesses were found to have characteristics of a most sophisticated business.

Financial Inclusion Levels

The survey indicated that about two-thirds of business owners are financially included while 35% of business owners (28 000) are financially excluded, that is they do not use any financial products or services (neither formal nor informal) to manage their business finances. Only 41% (31 0000) of business owners are banked and 12% (9 000) have/use other formal non-bank products and services. The survey showed that the financial inclusion differences between urban and rural usage of financial products lies in the extent of usage of bank products and exclusive reliance on informal mechanisms (illustrating the role of the informal sector in terms of pushing out the boundaries of financial inclusion, especially in rural areas). About 46% business owners in urban areas are banked while 36% in rural areas are banked. Around 22% rural business owners rely only on informal mechanisms to manage their business finances, as opposed to 18% of urban business owners.


According to the survey results, three in five business owners do not have a bank account - of those using bank accounts for business purposes, 71% use their personal bank account to manage their businesses’ financial needs. Only 15% make use of a business account in the name of the business. The study showed that cash related transactions are most common among businesses with a bank account with cash withdrawals and deposits accounting for 70% of all banking transactions. Around 96% of MSME customers make payments in cash and 92% of business owners pay employees in cash. The main drivers for banking are related to referrals and promotions whereby 39% chose a bank account because it was recommended by friends or family. About 26% chose a bank because it was advertised by commercial banks. Very few business owners chose a bank due to its product/service offering. The main barriers related to banking are affordability with 65% of business owners indicating that they are not banked due to monetary reasons (41% reported low income and 24% reported not making enough money from the businesses), while 4% do not know anything about banking (lack of financial literacy).

Savings and Investments

According to the survey results, 36% of business owners save mainly with informal groups and only 29% save with commercial banks. Around 40% business owners do not save. The main reasons for saving relate to managing and growing the business. Around 63% of business owners save to grow and expand their businesses while 45% save for day-to-day running of the business. The main barriers to saving relate to monetary reasons with 73% indicating that they do not save because the business is not making enough money while 28% put all their money back into the business.

Borrowing and Credit

The study indicated that 91% of business owners do not borrow or did not borrow money for business purposes in the past 12 months prior to the survey. This is at the back of the findings that show that there are three broad categories of business constraints; obstacles inhibiting starting a business, obstacles inhibiting smooth operations, and obstacles inhibiting growing the business. The common thread across the board is access to finance. About 49% of business owners reported access to finance as the leading obstacle in starting a business, 35% of owners reported access to finance limiting operations while 20% attributed it to inhibiting growth. Further analysis showed that only 2% of businesses access credit from the commercial banking sector. This suggests that Lesotho has very few suppliers of financial services targeting MSMEs, paving huge opportunities for microfinance institutions that could serve the purpose of grooming the MSMEs to a point where they are bankable.

Insurance and Risk Management

According to the survey results, 98% of business owners do not have any kind of insurance to manage business risks, while only 2% businesses have insurance. This is despite the fact that business owners in Lesotho mentioned that their businesses were exposed to risks in the past 12 months prior to the survey including death of the business owner (15%), not being paid by debtors (15%), theft of business stock (12%), competition (12%) and drought (10%). The main barriers to the uptake of insurance relate to financial literacy and lack of knowledge about insurance (28% did not know if there is any insurance product like that, 14% did not know how to get insurance and 13% did not know where to get insurance products).

Business Start-Up

Participants in the survey indicated that the main constraints to starting up a business are access to finance (49%). The majority used their savings to start or take over a business. There were a small number of business owners who used more than one source to obtain sufficient money for the start-up/takeover. Further 19% owners reported cash flow limitations, which is linked to access to finance. Other challenges during the start-up phase include difficulties with product/service differentiation including competing for similar customers (19%), what product/services to sell (14%) and too many competitors (13%). Business owners (47%) reported that economic need (unemployment) and the need to provide for their families (41%) were the main motivators for starting a business. It is encouraging to note that 47% business owners saw opportunities to be in the business. This may indicate that Lesotho business owners possess entrepreneur characteristics.

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About FinMark Trust

FinMark Trust (FMT) is an independent trust established in 2002 with the objective of making markets work for the poor. Initial core funding was provided by UKaid from the Department for International Development (DFID) through its Southern Africa office. Recently additional funders have come on board including the UNCDF, the Bill & Melinda Gates Foundation, the MasterCard Foundation as well as private and public institutions at country level. FinMark Trust’s purpose is ‘Making financial markets work for the poor, by promoting financial inclusion and regional financial integration’. FinMark Trust does this by conducting research to identify the systemic constraints that prevent financial markets from reaching out to these consumers and by advocating for change on the basis of research findings. Please visit for more information.


FinScope was launched in 2002 by the FinMark Trust ( Its purpose is to establish credible benchmarks on the use of, and access to, financial services. It is designed to highlight opportunities for innovation in products and delivery and also identify constraints. The FinScope survey is a comprehensive and national representative study on financial inclusion, looking at how people or small businesses source their income and manage their financial lives. It has been implemented in 27 countries (14 in SADC, 7 non-SADC Africa and 6 in Asia). FinScope MSME surveys have been conducted in seven countries including Lesotho.