Tsitsi Matope
LOANS from credit providers have brought so much relief for many people as start-up capital for businesses or for buying houses, vehicles and other necessities which improve the quality of their lives.
However, it is not such a happy ending for others who have found themselves at odds with the financial institutions after failing to service their loans because of a variety of reasons, such as loss-making businesses, loss of employment or simply borrowing from too many sources.
According to Letshego Financial Holdings, Chief Executive Officer, Yande Sikazwe-Mothae, it is the latter group which has become worrisome in Lesotho, adding that the challenge needed to be addressed as a matter of urgency.
Borrowing money without considering the consequences is as bad as drug-abuse, Ms Sikazwe-Mothae said, adding such serial debtors needed help.
It is estimated that a significant number of Basotho are taking home less than 30 percent of their net salaries each month because of debt.
The situation is so bad that the government has since imposed regulations for every civil servant to, at least, take home 30 percent of his or her net salary.
On the other hand, Letshego Financial Holdings is now providing specialised financial wellness clinics to its clients, to ensure they manage their finances better and don’t drown in debt.
The support is such a huge relief to many who never thought they would be in control of their finances again.
“One of the challenges we see is that some people borrow money to go on holiday or throw a party and not to start income-generating projects or build a home they can rent out to pay back the loan, for example,” Ms Sikazwe-Mothae said.
“At times, what worsens the situation is when people borrow from many institutions and find themselves overwhelmed and in bad debt.”
Financial education, she emphasised, was key to addressing such dire situations, hence her organisation’s financial wellness clinics.
Ms Sikazwe-Mothae also commended the government’s 30 percent take-home regulation which she said should enforce discipline on many people. At least 7 000 of the company’s clients are civil servants.
“As Letshego, we are quite happy with the 30 percent take-home salary development because most of our clients are civil servants. “Just like any other regulated financial institution, we are adhering to the government regulation. Our system does not allow us to make any lending deals with those already taking home 30 percent or less of their salaries,” she said.
According to Ms Sikazwe-Mothae, the government’s regulation had provided an opportunity for her organisation to intensify the rehabilitation of people who are heavily in debt.
“Many people need help and that is why we are providing specialised services. I personally sit with customers, some will be in a terrible shape, financially. My responsibility is to help them out of that condition through discussions aimed at restructuring spending habits and instilling financial discipline,” she said.
The drive to correct society’s practices when it comes to managing money through the Letshego financial discipline model is helping many people live within their means and in turn, leave them in a position to settle their debts.
“We are working with all people who come to us for help, to create a payment plan. Through our clinics, we are able to get them to that state of mind, of seeing good in paying back. We have to take them through a process that makes them realise there is a way out of their situation as long as they have an income and that they do not have to find themselves in that dark hole ever again.”
She said sustenance of the clinics is crucial both for debt-management and prevention of bad debt.
“In a few years, we would like to see people having the ability to manage their money and not for the money to throw them off the rail. I believe it’s not just Letshego that would like to see such an empowered society,” she said.
Meanwhile, Lesotho still faces challenges regulating unregistered moneylenders. To a certain extent, the Lesotho Credit Bureau is helping regulated lending institutions make loan decisions in individual cases. Its primary purpose, as directed by the Financial Institutions Act, is to ensure that creditors have the information they need to make decisions. To strengthen its database, licensed financial institutions, including banks, are expected to report to the bureau.
