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Making financial markets work for the poor
FinScope MSME Survey Lesotho 2016
*
Launch presentation
Maseru, 03 November 2016
Contents
1. Introduction, background and methodology of the survey
2. Size and scope of the MSME sector
3. Capacity to grow & Challenges
4. Summary
5. Financial inclusion
6. Business sophistication measure (BSM)
7. Conclusions and recommendations
2
Partnering for a common purpose, inclusivity and capacity building
Ministry of Small Business Development, Cooperatives and Marketing - Chair
Ministry of Finance (Steering Committee deputy chair and funder)
Steering Committee
• Ministry of Small Business Development, Cooperatives and Marketing - Chair
• Ministry of Finance – Deputy Chair • FinMark Trust • AfricaScope • Bureau of Statistics (BOS) • United Nations Development Programme • Ministry of Development Panning • Ministry of Agriculture and Food Security • Basuto Enterprises Development
Corporation (BEDCO) • Central Bank of Lesotho • Lesotho Chamber of Commerce & Industry • Private Sector Foundation of Lesotho
FinMark Trust Main Funder
(Project management, technical assistance)
Bureau of Statistics (Statistical oversight, quality control)
AfricaScope (Research House)
United Nations Development Programme (Funder)
3
About FinMark Trust
• Independent trust formed in April 2002 • Initial and core funding from the UKAid from the Department for International
Development. Other donors are now on board. • Mission: “Making Financial Markets Work for the Poor” • Aim: Facilitating and catalysing development around access to financial services • How: Moving beyond data production, with an increased focus on being a catalyst to
systemic change in financial inclusion by providing support to transformation at a country level
4
Introduction and background
= Comprehensive study focusing on individual entrepreneurs, and owners of micro-, small- and medium enterprises (MSMEs) and their financial services needs
FinScope MSME surveys have been conducted in: • Zambia (2009) • South Africa (2010) • Tanzania (2010) • Malawi (2012) • Mozambique (2012) • Zimbabwe (2012) • Lesotho (2016) • Currently underway in Swaziland
FinScope MSME Survey
5
FinScope Consumer Surveys have been conducted in 27
countries, including Lesotho (2011, conducted, a follow-up
survey is due)
• To assess the size and scope of micro, small, and medium enterprises (MSMEs) in Lesotho
• To describe the levels and landscape of access to financial products and services (both formal and informal)
• To identify the most binding constraints to MSMEs development and growth with a focus on access to financial markets
• To identify and describe different market segments with specific development needs in order to stimulate segment related innovation
• To propose recommendations regarding financial access by MSMEs as well as development policies
Objectives of FinScope MSME Survey Lesotho 2016
6
Lesotho MSME Policy: Priority Intervention areas
• Enabling legal and regulatory environment;
• Entrepreneurship training and skills development;
• Technological development and innovation;
• Access to finance;
• Infrastructure development and business shelter; and
• Access to markets, including the development of MSME clusters;
Cross-cutting areas: These are as follows:
Gender in development and women economic empowerment in
MSME development;
Youth and economic empowerment in MSME development;
HIV and AIDS and dealing with other marginalised groups such as
persons living with disability, and
Managing the environment. 7
Survey methodology
Field checks, sample frame and weighting of the data was conducted by AfricaScope
Enumerator areas (EAs)
Using probability proportional to size (PPS)
Households
Using systematic random sampling
8-12 qualifier households from each EA were selected
Individual (MSME owner)
via Kish Grid
Multi-stage sampling process Comprehensive listing exercise
336 EAs Over 47 000 households, identifying over 4 000 MSME owners TOTAL: 2 182 Face-to-face interviews (September 2015 to February 2016, conducted by Africa
Scope)
Nationally representative sample of small business owners who:
• Are 18 years or older
• Perceive themselves to be business owners/ generating an income through business activities
• Employing ANY number of people (including individual entrepreneurs without any employees)
Target population
8
1. Introduction, background and methodology of the survey
2. Size and scope of the MSME sector
3. Capacity to grow and Challenges
4. Summary
5. Financial inclusion
6. Business sophistication measure (BSM)
7. Conclusions and recommendations
9
Defining MSMEs for this survey
Micro Small Medium
No. of employees
(including owner)
Less than 5
employees 6 - 20 21 – 50
Annual turnover Less than
M200 000
Less than
M1 000 000
Less than
M5 000 000
Legal structure Informal Formal Formal
By the number of employees and annual turnover
10 Source: Micro, Small, Medium Enterprises (MSMEs) policy for Lesotho
Size: Percentage of MSME owners
11
Businesses in Lesotho by number of employees %
83
7
4
2
1
3
0 (no employees)
1 (employee)
2 (employees)
3 (employees)
4 (employees)
5+ (employees)
97
3 0.3
Micro-Enterprise Small Enterprise MediumEnterprise
MSME Sector by size of business %
Businesses Percent
Micro-Enterprise 73 746 97
Small Enterprise 2 065 3
Medium Enterprise 257 0.3
Total 76 068 100
Based on employees, 97% of MSMEs are in the informal sector
Size and scope of the MSME sector
76 068
MSME owners
Employing
54 939 people
(any age)
Owning
85 173
MSMEs
Estimated turnover (Monthly)
192 million Maloti
(75% of MSME owners
reported on turnover)
118 000 people work in the sector (this number includes 55 000 employed and 63 0000 individual entrepreneurs)
63 191 individual entrepreneurs
12 877 business owners with employees
83%
17% Important contribution to employment
12 LSL/US$ exchange rate in September 2015 (start of fieldwork) = 14.0172
Age of business
10 14 11 10
25 30
2015/2016(1 year)
2014 2013 2012 2011-2006 2005 andless (11years +)
Number of years in business %
36
24
40
Start-up (2 years andless)
Growth (between 3 and5 years)
Established (6 years andmore)
Business by life cycle %
30% have been in business for more that 11 years, thus indicating that businesses are either in the growth phase or are established businesses
There was a slight decline in the formation of business in 2015/2016 compared to 2014
The majority of the business (64%) have been in business for more than 4 years
13
Macro trends in Lesotho
14
Business Sector
18
1
1
1
1
1
2
3
3
9
10
22
30
Other service activities
Electricity, gas, steam
Education
Professional, scientific technical
Real estate activities
Human health and social work
Construction
Arts, entertainment and recreation
Transportation and storage
Manufacturing
Accommodation and food services
Agriculture, forestry and fishing
Wholesale and retail trade
Most of these activities are retail in nature
%
15
69% sell merchandise in the same
form
22% add value and
sell
31% Accommodation
construction
25% Tourism
53% rear livestock,
15% grow crops
28% sell cooked
food
69% Sell bricks,
furniture & craft
16% Add
value
78% Buy &
sell
16% Add
value
Estimated turnover of the sector
Estimated turnover (monthly)
192 million Maloti (75% of MSME reported turnover)
Sector Size Turn over
Wholesale, retail and repair of motor vehicles
30% 65 000000
Agriculture and Forestry 22% 39 471 000
Other services activities 18% 32 333 000
Accommodation and food services
10% 13 600 000
Manufacturing 9% 12 700 000
Transportation and storage
3% 3 146 000
Business size Size Turn over
Micro 97% 184 875 500
Small 3% 5 214 250
Medium 0.3% 1 910 250
42
58
Keep financial records
Do not keep financial records
Financial record keeping %
17
LSL/US$ exchange rate in September 2015 (start of fieldwork) = 14.0172
Below the surface
18%
81%
Formal (registered) MSME sector (13 899) Informal MSME sector (61 800)
Limited (financial) resources and information preclude the possibility of spreading policy initiatives to include the entire MSME sector
Current focus of interventions
FinScope MSME Survey
Licensed Business (13 262)
Unlicensed Business(62 806)
17%
83%
18
Registered MSMEs
Total number of registered businesses: about 13 900
94% of those registered, claim to be registered with Lesotho Registration Office 2% claimed registration was in progress
Type of registration %
19
94% Micro-Enterprise 13 054 4% Small Enterprise 616 2% Medium Enterprise 230
94
4 2
97
3 0.3
Micro-Enterprise Small Enterprise Medium Enterprise
Registered Total
3
2
0.3
2
2
5
6
82
Do not know
Other
Franchise
Co-operative
Community project
Partnership
Company
Sole proprietor
%
Registration
Cost, knowledge & complexity of registration process • Time: about 5 days
• Cost: at least 500 Maloti
• Problems experience by those who registered
Reason for not registering/licensing • Costs – Business too small (50%), no money (11%)
• Knowledge – Do not know how (17%), too complicated (12%)
*Source:
http://www.doingbusiness.org/data/exploreeconomies/Lesotho#starting-a-
business
20
Perceived benefits of registration %
3
4
4
4
7
24
49
Access togovernment tenders
No benefits/none
Avoid fines
Avoid harassmentfrom authorities
Access to finance
Do not know thebenefits
Comply with the law
1. Introduction, background and methodology of the survey
2. Size and scope of the MSME sector
3. Capacity to grow and Challenges
4. Summary
5. Financial inclusion
6. Business sophistication measure (BSM)
7. Conclusions and recommendations
21
Business skills Acquiring business skills
2
2
2
3
7
8
8
9
9
49
Other
Spouse
University/college
School
On the job
Previous job or work experience
Mentor/advisor
Training programmes/courses
My family
Taught myself
• 42% keep financial records • 84% do not get help but keep records
themselves • 96% keep records manually • Only 6% have a book keeper or auditor 22
9
35
29
20
7
Very successful
Fairly successful
Struggling butpromising
Struggling butsurviving
At risk or in danger offailing
• The owners with successful business are more likely to be registered, keeping financial records and claim that their businesses performed better than the previous season
Opinions about the business % Acquiring business skills %
Business skills & Sources of information
4
2
3
4
5
6
6
81
Other
National University of Lesotho
Ministry of Finance
Lesotho National DevelopmentCorporation LNDC
Trade and Industry
The Basotho EnterprisesDevelopment Corp.
Lesotho Revenue Authority(LRA)
None
Organisations made use of (those who are aware) • Lesotho Revenue Authority14% • Trade and Industry 8% • Basotho Enterprises Development
Corporation 8% • Civil Society Organisation 3% • Other 7%
23
6
3
3
4
6
8
19
23
24
25
31
Other
Support organisation
Business association
Professional consultant
Suppliers
Customers
Businesses owners
Spouse/partner
Relatives
Friends
Do not seek advice
Awareness of Organisations offering support services % Sources of information %
About a third of business owners do not seek business advice, while of those who seek business information 72% rely on immediate contacts (family and friends)\
Main business constraints
8
13
13
14
19
19
49
None/noproblems
Being owedmoney/debtors
Too manycompetitors
Whatproduct/service
to sell
Cash flow
Not enoughcustomers
Sourcing money
24
To start a business %
9
8
13
16
22
26
35
None/noproblems
Who to sell to
Too manycompetitors
Not enoughcustomers
Being owedmoney/debtors
Cash flow
Sourcing money
Operational constraints %
7
5
5
7
7
15
16
20
Other
Transportation
Crime and theft
Cost of finance
Bad weather/naturaldisasters
Competition
Space to operate
Access to finance
Obstacles to grow the business %
1. Introduction and background and methodology of the survey
2. Size and scope of the MSME sector
3. Capacity to grow
4. Summary
5. Financial inclusion
6. Business sophistication measure (BSM)
7. Conclusions and recommendations
25
Country comparison
26
South Africa
(2010) Malawi (2012)
Mozambique
(2012) Zimbabwe (2012) Lesotho (2016)
Business owners
16 years and older
200 employees or
less
18 years and older
100 employees or
less
18 years and older
100 employees or
less
18 years and older
75 employees or
less
18 years and older
49 employees or
less
Estimated adult
population 33,5 million 6,1 million 10.8 million 5,9 million 1,1 million
Estimated % of adult
population that owns
MSMEs
17% 13% 42% 46% 7%
Number of MSME
owners 5,6 million 760 000 4,5 million 2,8 million 76 068
Number of MSMEs they
own 6 million 1 million 4,9 million 3,5 million 85 000
% of MSME owners with
registered businesses 17% 3% 14% 15% 18%
Number of employees 6 million 1 million 850 000 2,9 million 118 000
% of individual
entrepreneurs
% of businesses with
employees
67%
33%
59%
41%
93%
7%
71%
29%
83%
17%
26
1. Introduction, background and Methodology of the survey
2. Size and scope of the MSME sector
3. Focus on agriculture sector and youth
4. Capacity to grow
5. Summary
6. Financial inclusion
7. Business sophistication measure (BSM)
8. Conclusions and recommendations
27
Total business owner (BO) population = Minimum age defined by the age at which individuals can enter into a legal financial transaction in their own capacity
Financially included = BOs who have/use financial products and/or services for business purposes – formal and/or informal
Financially excluded = BOs who do not have/use any financial products and/or services – if borrowing, they rely only on friend/family; and if saving, they save at home
Formally served = BOs who have/use formal financial products and/or services provided by a formal financial institution (bank and/or non-bank)
Informally served = BOs who have/use financial products and/or services which are not regulated, e.g. farmer associations, saving clubs/groups, private money lenders
Banked = BOs who have/use financial products and/or services provided by a commercial bank regulated by the central bank
Served by other formal (non-bank) financial institutions = BOs who have/use financial products and/or services provided by regulated non-bank formal financial institutions, e.g. insurance companies
Financial inclusion - Framework
28
Total business owner (BO) population 100% (76 068)
Financially included 65% (48 317)
Financially excluded 35% (27 751)
Formally served 45% (34 301)
Informally served=38% (28 856) Driven by informal savings
Banked 41% (30 973) Driven by cash
transactions and savings
Served by other formal financial institutions 12% (9 128) Driven by mobile money
Financial inclusion among MSME owners in Lesotho
29
Overall levels of financial inclusion, overlaps and Lesotho MSME Access Strand
35
38
12
41
45
Excluded
Informal
Other formal (non-bank)
Banked
Formally served
Overalls with overlaps %
41 4 20 35
Banked Other formal (non-bank) Informal only Excluded
Access Strand %
30
Access Strand by MSME classification
41
52
40
4
5
20
13
20
35
35
35
Overall
Medium/Small
Micro
Banked Other formal (non-bank) Informal only Excluded
%
31
Banking Status
41 59
Banked Unbanked
71% use their personal bank accounts for most of their business banking
15% use bank account in the name of the business
84% normally go to the bank branch/ATM themselves
56% access their bank branch in 30 minutes or less
45% deposit their money in the bank on a daily basis
Drivers – 33% recommendation; 22% advertising and 22% already had personal account there
64% of banked business owners use the banking facilities monthly
32
%
Mobile money services
8
92
Use mobile money Do not use mobile money
1
3
3
8
47
51
Money transfers betweenmy bank accounts Mobile
Money
Cash deposits for thebusiness Mobile Money
Buy cell phone or airtime forbusiness Mobile Money
Paying business accountswith Mobile Money
Customer payment Mobilemoney e.g. Mpesa/Ecocash
Using utilities bills MobileMoney
Mobile money usage % Mobile money drivers %
33
Savings overalls and Savings Strand
29 1 25 6 40
Bank savings products Other formal (non-bank) Informal
Saving at home only Not saving
40
12
36
1
29
30
Do not save
Save at home
Informal
Other formal (non-bank)
Bank savings products
Formally served
Overalls with overlaps %
Saving Strand
34
Credit overalls and Credit Strand
2
0.2
4 3 91
Bank credit Other formal (non-bank)Informal Borrow from family/friends onlyNot borrowing money
91
3
4
0.2
2
2
Not borrowing
Family/friends
Informal
Other formal (non-bank)
Bank credit
Formally served
Overalls with overlaps %
Credit Strand
35
20% attributed ‘access to finance’ to inhibiting
growth
Main constraint in starting business
is ‘access to finance’
35% of owners reported access
to finance limiting
operations
Insurance uptake
2
98
Business have insurance Not insured
7
9
10
12
12
15
15
Theft of businessequipment
Rain damage
Drought
Theft of business stock
Compeition
Death of business owner
Not being paid bydebtors
Insurance penetration % Insurable risks experienced %
36
A lack of knowledge regarding how and where to obtain insurance, and what to get needs to be addressed by insurance companies before they can expect a significant increase in the uptake in insurance.
1. Introduction, background and Methodology of the survey
2. Size and scope of the MSME sector
3. Focus on agriculture sector and youth
4. Capacity to grow
5. Summary
6. Financial inclusion
7. Business sophistication measure (BSM)
8. Conclusions and recommendations
37
TRADITIONAL SEGMENTATION APPROACH And the Business Sophistication Measure (BSM)
• Registration • Very low levels of any type of registration
• Number of employees • Mostly one or two employees
• Turnover • Lack of record keeping • Under and over stating of turnover • Confusion between turnover, income and profit
• Formal versus Informal • Many different definitions of what is formal/informal
Micro Small Medium
No. of employees
(including owner)
Less than 5
employees 6 - 20 21 – 50
Annual turnover Less than
M200 000
Less than
M1 000 000
Less than
M5 000 000
Annual turnover Informal Formal Formal
97
3
0.3
Micro-Enterprise
SmallEnterprise
MediumEnterprise
Source: Micro, Small, Medium Enterprises (MSMEs) policy for Lesotho
MSME Sector by size of business %
38
BSM DEVELOPMENT (Methodology for constructing the BSM)
A two stage process applied to the data:
• The first step:
• Identify those variables contained in the survey which would best reflect the diversity of business practices in the country.
• Ensure a reflection of the full scope of Lesotho business along a stratified continuum.
• Step 2
• Conduct a principal component analysis using significant variables from the sample weighted data.
• Obtained a statistically significant solution with 5 clusters
• Rank the original principal component analysis
• Combine outlier clusters
• Obtain the final 3 BSM segments.
• 20 variables were used
• Psychographic variables – Attitudes and motivations
• Demographic variables – Age and gender
• Access to services – Water electricity and others
• Registration – Registered or not
• Access to finances – Have a bank product
• Financial capability – Keep financial records
39
Sophistication of MSME Sector in Lesotho (Size and scope of the various segments)
45 41
14
Leastsophisticated
EmergingBusinesses
Mostsophisticated
MSME Sophistication in Lesotho %
Least sophisticated approx. = 34 456
Emerging Businesses approx. = 30 960
Most sophisticated approx. = 10 652
Total MSME businesses = 76 068
55 44 43 49
45 56 57 51
Leastsophisticated
EmergingBusinesses
Mostsophisticated
Total
Urban versus rural divide %
Rural Urban
40
Seek business advice from others
66 70 74
34 30 26
Leastsophisticated
EmergingBusinesses
Mostsophisticated
Seek business advice from others %
Yes No
Provider of business advice Least
sophisticated
Emerging
Businesses
Most
sophisticated
Spouse/partner 21% 23% 31%
Friends 16% 15% 14%
Other small business owners 12% 13% 13%
Relatives 8% 6% 8%
Customers 2% 3% 2%
Professional consultant 2% 3% 1%
Suppliers 1% 1% 1%
Business association 0% 0% 1%
Small business support
organisation 1% 1% 1%
Other or do no seek advice 36% 32% 27%
• About 5% of business owners have no formal education • More sophisticated business owners have higher education • Low levels of advice sought from others • 62% of least sophisticated do not belong to any groups • Low levels of belonging to business groups • Need to develop higher levels of BDS in Lesotho
41
External buyers and suppliers
3 4
7 7
9
11
Least sophisticated Emerging Businesses Most sophisticated
Export to customer outside Lesotho Suppliers outside of Lesotho
• Instead of developing and implementing blanket programs to increase exports, a targeted approach aimed at those businesses actually involved with export business would yield higher returns on investment.
• Similarly for the streamlining of customs operations
%
42
Perceptions of business performance
42
48
48
30
28
31
17
16
13
6
5
3
4
3
5
Least sophisticated
Emerging Businesses
Most sophisticated
Better The same Worse Just starting out Can’t say/don’t know
Overall 45% of business owners say that they feel their business is doing better than 12 months ago. The more sophisticated groups feel more positive about their business performance.
%
43
Keep financial records
39 43 51
61 57 9
Least sophisticated Emerging Businesses Most sophisticated
Yes No
• Only 51% of most sophisticated businesses say that they keep financial records • Important area of BDS training • Impact on financial inclusion
%
44
Financial Access Strand by BSM
35
42
57
41
4
4
5
4
21
21
12
20
40
33
25
35
Least sophisticated
Emerging Businesses
Most sophisticated
Total
Bank Other formal non-bank Informal mechanism only Excluded
• 6 075 out of the 10 700 business owners in the most sophisticated segment have a bank account with a commercial bank.
• Potentially 4 625 sophisticated business without an account with a commercial bank. By focussing on banking these businesses financial inclusion in the country can be much improved.
• About 6 500 emerging businesses are using informal products. Many of these businesses are located in urban areas and display characteristics which could cause them to be banked with commercial banks.
• Carefully targeted strategies by financial service providers such as mobile money products could dramatically improve financial inclusion.
%
45
Conducting business banking
60 53
68
3 6
4
37 41
28
Least sophisticated Emerging Businesses Most sophisticated
Go yourself Send someone else Don’t go to the bank
• Majority of owners work 8 hours a day
• Tend to go to the bank themselves
• Indication of the needs for mobile and internet banking facilities
%
46
Obstacles to growth (Challenges)
Least Sophisticated
• Space to operate
• Competition
• Crime and theft
• Transportation
• Access to land
Emerging Businesses
• Access to finance
• Space to operate
• Electricity supply
• Access to land
Most Sophisticated
• Access to finance
• Competition
• Cost of finance
• Infrastructure development
47
Savings Strand
23
30
41
29
0
1
0
1
23
27
22
25
7
5
5
6
46
36
31
40
Least sophisticated
Emerging Businesses
Most sophisticated
Total
Bank Other formal (non-bank) Informal Home only Not saving
• Overall 29% of business owners are saving with a formal bank • 41% of the most sophisticated save with a formal bank • 46% of the least sophisticated are not saving for business
purposes
Save for business purposes%
48
1. Introduction and background
2. Methodology of the survey
3. Size and scope of the MSME sector
4. Focus on agriculture sector and youth
5. Capacity to grow
6. Summary
7. Financial inclusion
8. Conclusions and recommendations
49
Key take outs
Ease of doing business
• Starting the business
• Dealing with permits
• Electricity supply
• Property registration
• Getting credit
• Paying taxes
• Trading across borders
Cost of doing business
• Registration
• Start-up costs
• Finance costs
• Cost of business premises- purchase/rental/lease
• Cost of utilities
• Staff productivity/cost
• Transportation cost
50
Key take outs
Product differentiation
• Innovation
• Marketing
• Market trends
• Segmenting markets
• Target marketing
• Unique product values and propositions
• Packaging
• Increased service offered
• Partnering with like providers
Employment creation
• Tax credits
• Subsidised employees
• Youth employment
• Infrastructure development
• Sector investment and incentives
• Rural development
• Education, training and skills development
51
MSME Policy: Priority Intervention areas
1. Enabling legal and regulatory environment;
2. Entrepreneurship training and skills development;
3. Technological development and innovation;
4. Access to finance;
5. Infrastructure development and business shelter;
and
6. Access to markets, including the development of
MSME clusters.
52
Enabling legal and regulatory environment
• Only 18% registered business
• 66% say to comply with the law
• 7% to access Government tenders
• 7% to avoid harassment
• 5% to access finance
• Provide positive motivation to register
Registration and licensing of MSME's
• Review registration (benefits & processes)
• Costs an issue • Incentive for legal
compliance • Carrot versus Stick
approach
53
Entrepreneurship training and skills
development
• 118 000 currently employed
• Target 150 000 by 2018
• Incentives for increased employment opportunities e.g. tax relief
• District level incentives
MSME contribution to
employment
• Increase awareness of BDS providers
• Set awareness targets -from 19% currently to 40% by 2018
• Coordinated cross-focus approach
• Focus on:
• Marketing
• Record keeping
• Business skills education at college/university level
Need for skills
training
54
Technological development and innovation
• Only 3% have a written business plan
• Only 10% have signage advertising the business
• Only 2% have an email address
• Fewer than 1% have a website
• Only 2% have internet access
• Increase number of training facilities
Limited use of sophisticated
marketing techniques
• Support MSME owners in their venture to market their business (networking, referrals, local business directories, radio, billboards, local newspapers)
• BDS • Education
55
Infrastructure development and business shelter
• 61% of businesses operate from residential premises
• 16% say lack of space to operate as a challenge to growth
• Consideration to creation of MSME business hubs
• Land tenure improvements
Lack of operational
space
• Tackle operational space issue with regards to availability and affordability
• Supply of services – water, electricity and sanitation
56
Access to markets, including the development of MSME clusters
• 16 500 (22%) of businesses are in agricultural sector
• 52% are informally financially served
• 36% say sourcing money is biggest operational challenge
• Only 7% licensed/registered
• 7 000 of the agricultural businesses say they are struggling
• MFI opportunities
Importance of
Agriculture
• Need for affordable and flexible solutions to cover seasonal input and fixed assets (agri finance);
• Need tailored agricultural insurance;
• Infrastructure development
• Facilitate market access
57
Access to finance
• Support development of financial products and services that are: • Affordable (given low levels of
income)
• Appropriate - flexible (given irregularity of income)
• Accessible (given hours and days worked)
• Insurance provision as safety net
• Mobile banking
• Huge opportunities for microfinance institutions that could serve the purpose of grooming the MSMEs to a point where they are bankable
Low levels of access and
usage of financial
products and services
58
Access to finance
• 49% say access to finance a challenge to start business
• 24% say getting a loan from a bank is difficult
• Only 2% of all businesses have borrowed money from a bank
• 36% say the amount of their last loan was under M1 000
• 40% say the loan period was under 3 months
• 35% sourcing money is one of biggest operational problems
Access to
credit and
loans
• 35% said the needed less than M 1 000 to start the business
• 25% said they received money from savings group or friends and family
• Of the 9% currently borrowing, 7% borrowed money from informal sources or friend and family
Importance of informal financial
mechanisms
59
Business Development Services (targets)
Least
sophisticated
Emerging
Businesses
Most
sophisticated
Total
Market
Total market 34 488 30 881 10 699 76 068
Professional advice source
Professional consultant 648 1029 125 1802
Government institution 160 96 14 270
Small business support organisation 251 392 65 708
Business association 69 8 97 174
Currently using professional advice 1128 1525 301 2954
Potential Market 33 359 29 356 10 398 73 113
Possible gains 10% 40% 60%
Probable market 3 336 11 742 6 239 21 317
• There is an overall lack of business sophistication in the MSME sector.
• There is a critical need to expand efforts in Lesotho to provide BDS services to the
MSME sector. It is estimated that the potential size of the BDS market for various
services could be as high as 21 000 businesses.
• This estimated potential market improvement, 10% of the least sophisticated
segment, 40% of the emerging segment and 60% of the most sophisticated:
60
Registration of businesses (targets)
Least
sophisticated
Emerging
Businesses
Most
sophisticated Total Market
Total market 34 488 30 881 10 699 76 068
Currently
registered 5618 5507 2774 13899
Potential Market 28 869 25 374 7 925 62 168
Possible gains 10% 40% 60%
Probable market 2 887 10 150 4 755 17 792
• There could be a significant increase in the number of businesses registered by addressing
the reasons why businesses say that they are not registered. The majority provide the
following reasons:
Business is too small
No benefit to registering
Process too complicated
Do not have the money to register
• These perceptions can easily be addressed through advertising and direct business
contacts. If addressed it is estimated that an additional 17 800 business could be
registered.
• This estimated potential market improvement, 10% of the least sophisticated segment, 40%
of the emerging segment and 60% of the most sophisticated:
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Formal Sector Banking (targets)
The banking sector could increase the number of banked businesses, through
product and service innovation, (particularly Mobile and Internet Banking) by over
12 000.
This estimate is arrived at by looking at the size of each BSM, taking the number
of currently banked into consideration and then assuming that the industry could
attract, from the potential market, 10% of the least sophisticated segment, 40% of
the emerging segment and 60% of the most sophisticated:
Potential
banking increase
Least
sophisticated
Emerging
Businesses
Most
sophisticated Total Market
Total market 34 488 30 881 10 699 76 068
Currently banked 11 929 12 969 6 075 30 973
Potential Market 22 558 17 912 4 624 45 094
Possible gains 10% 40% 60%
Probable market 2 256 7 165 2 774 12 195
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Thank you [email protected] [email protected]
www.finmark.org.za
For more information on FinScope MSME Survey Lesotho 2016 please contact:
Dr Kingstone Mutsonziwa [email protected]
Mr Jabulani Khumalo [email protected]
Tel: +27 11 315 9197 www.finmark.org.za
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