Central Bank of Lesotho (CBL)Governor, Retšelisitsoe Matlanyane says the five new laws enacted this year would ensure the country achieves the anticipated economic growth through properly administered financial and insurance institutions.
Speaking during a press conference held at Lehakoe this week, Dr Matlanyane highlighted the new regulations which she said would ensure better regulation of the financial and insurance sectors.
“The following laws and regulations were duly gazetted this year, namely the Insurance Actof 2014, Payments Systems Actof 2014, Financial Institutions ( Money Transfer) Regulationsof 2014, Financial Institutions (Credit Only and Deposit-taking Micro-Finance Institutions) Regulations of 2014 and Financial Institutions (Foreign Exchange Bureau) Regulations of 2014,” Dr Matlanyane said.
“The Insurance Act of 2014 repealed the Insurance Act of 1976 in order to provide for the consolidation, administration, supervision, regulation, protection and development of insurance business in Lesotho. It also ensures the insurance industry meets the demands of the economy for risk-management and stimulation of growth in the investment sector.”
Dr Matlanyane also said it was “a well-known fact” that the recent global financial crunch began through challenges in the insurance sector, hence Lesotho’s decision to take protective measures.
“One of the lessons learnt by regulators from the global financial crisis is that there is increased need to enhance the regulation of insurance businesses. Through this Act, the Commissioner of Insurance can make necessary regulatory changes to achieve the desired supervision, regulation and development of insurance businesses in Lesotho.”
According toDr Matlanyane, there have been substantial changes in the size and growth of Lesotho’s economy, hence the need for appropriate and relevant legislation.
“The scope of operations by the insurance sector has also changed with the growth of the economy. The repealed Act is therefore, out of date and does not address the prevailing developments and challenges in the insurance industry. Additionally, the Act does not provide the CBL, as the regulator and Commissioner of Insurance, with the necessary powers and tools to enable it to achieve effective regulation and supervision of the sector.
“Other pitfalls stem from the fact that most penalties under the Insurance Act were last formulated in 1976, and have now fallen behind in terms of value and are no longer penal.
“Licensing requirements are also loose, and other classes of insurance are not catered for, such as micro-insurance. Worse still, there are no provisions relating to combating money-laundering and financing of terrorism, thereby rendering the insurance sector vulnerable to such illegal activities.”
On the Payments Systems Act of 2014, Dr Matlanyane said: “The objective of the Act is to provide for the establishment and operation of interbank payment systems, clearing houses and securities settlement systems, including collateral and netting arrangements, as well as related purposes.”
Equally important, she further noted, is the Financial Institutions (Money Transfer) Regulations of 2014, which would ensure the CBL “strengthens existing non-banking financial institutions and encourages the development of new ones.
“The ultimate aim is to enable non-banking financial institutions to make a full contribution to growth and poverty reduction by providing access to appropriate and accessible financial services for urban and rural areas of Lesotho.”
The Financial Institutions (Credit Only and Deposit-taking Micro-Finance Institutions) Regulations of 2014 would also help Lesotho strengthen non-banking financial institutions, she added.
“Lesotho’s financial services are still dominated by loan products designed for more traditional borrowers and offered by banks. This leaves low-income households, small businesses, individuals and microenterprises in the cold.
“These regulations tend to close this gap by providing an enabling legal framework where Credit Only and Deposit-taking Micro-Finance Institutions can offer products that are accessible, affordable and designed to meet the needs of microenterprises and low-income households,” Dr Matlanyane said.
The governor also spoke about the Financial Institutions (Foreign Exchange Bureau)Regulations of 2014.
“The objective of the Foreign Exchange Bureau Regulations is to provide for minimum licensing requirements for the operation of a Foreign Exchange Bureau, having regard to best practice principles.
“The regulations are further meant to assist the government in ensuring that foreign exchange businesses observe appropriate anti-money laundering and financing of terrorism legislation.”