Bereng Mpaki
FINANCIAL institutions can now vet their clients’ credit worthiness before approving their loan applications to stem the high levels of indebtedness.
This after the launch of the Financial Consumer Protection Act, 2022 this week. It was enacted last month.
Speaking during the launch, Central Bank of Lesotho (CBL) Governor, Maluke Letete, said rampant indebtedness among the public was negatively affecting the country’s economic development.
Dr Letete said the Act, which is also meant to protect the public’s rights in seeking financial services, was envisaged to address many consumer challenges including indebtedness.
Some financial services clients were in the habit of securing multiple loans concurrently and in the end erode their salaries due to loan deductions at the end of the month, he said.
While Lesotho had made notable progress in educating the public about handling their financial affairs, there were still high levels of indebtedness among the public.
“There is some progress made in financial inclusion and education, but our people remain very indebted,” Dr Letete said.
“They jump from one credit provider to another. Then they then jump again from the second credit provider to the informal micro financiers on the street and so on.
“At the end of the month, some of them take home around M20 and this is negatively affecting Lesotho’s economy.
“The level of indebtedness is rising daily. We must get back those people and free their household budgets again. And I hope the law we are launching today ensures that these issues will be things of the past.”
Among other things, the Act addresses indebtedness through prescribing assessment of a client’s credit worthiness before their loan application can be approved.
The Act mandates financial service providers to disclose their client’s information to the Credit Bureau for assessment.
After the assessment, the Credit Bureau shares the results with the service provider who then communicates the information to the client.
The service provider must inform the client if the loan application is declined due the Credit Bureau’s assessment.
On her part, United Nations (UN) Resident Coordinator, Amanda Mukwashi, called on the authorities to provide adequate financial market options so that consumers do not to fall prey to shoddy schemes.
“Protection and access to markets is equally important if the country is to achieve private sector led economic growth and job creation for 38 percent of its youth who are not working. Lessons from Covid-19 lockdowns showed that access to markets can be an incentive for local production and job creation,” Ms Mukwashi said.
Delekazi Mokebe, the Bankers Association of Lesotho (BAL) chairperson, said the Act would promote fairness and accessibility in the financial sector.
“The Act has come at a time when the BAL was already implementing most of its requirements. We commit to fully adhere to it going forward in our day to day operations,” Ms Mokebe said.
