MASERU — The government has set up a M50-million credit guarantee scheme to help small, micro and medium enterprises (SMMEs), Finance Minister Timothy Thahane (pictured below) told parliament on Monday in his budget speech.
Thahane has also increased the National Manpower Development Secretariat bursaries from last year’s M595-million to M717.5 million this year.
The government has also set aside M225-million for the school feeding scheme after the World Food Programme said it will pull out this year, Thahane said.
He said the government has also allocated M54-million for scholarships for orphans.
The government, Thahane said, has further increased the social protection budget by seven percent from M564.5-million to M605.8-million.
Thahane told parliament that the government is set to increase the number of households connected to the electricity grid countrywide with government allocating M373-million for the project.
M544.4-million has been allocated to upgrade roads including bridges and footbridges in the mountainous areas.
Thahane said the partial guarantee fund for SMMEs has been established together with commercial banks with the aim to train new entrepreneurs on how to start and run a business as well as prepare a business plan.
He said for the scheme to succeed applicants must organise themselves well and work cooperatively together to identify business ventures and opportunities.
He also said its success depends on the willingness, discipline and the commitment to repay and service their loans.
If by unavoidable circumstances the debtors fail to repay the loans, Thahane said the government would pay 70 percent of it while the bank that loaned would lose 30 percent.
“This initiative is directed especially at young people and women who can organise themselves into enterprises,” Thahane said.
“It is of no use to provide access to finance when the applicants do not know how to run a successful business,” he said.
“The fund and banks will share the risk in cases of genuine business failures.”
Thahane said in light of the fact that productive and sustainable jobs cannot be created in the public sector, the government can facilitate and create conditions, frameworks, institutions and facilities that will enable the private sector to be a true engine of growth for young people.
He said the government plans to equip the youth with skills that will make them internationally competitive in product and labour markets.
This initiative is aimed at young graduates, women and other self-employed entrepreneurs, Thahane said.
“This is the establishment of a joint initiative with commercial banks,” he said.
“The fund will be under the supervision and direction of an independent board and chief executive.”
Beneficiaries of the fund will be taught how to prepare business plans and run a business.
“It is expected that many young people will take advantage and become their own employers,” Thahane said.
The scheme will have its own charter, capital and a governing body.
It will also be licensed and supervised by the Central Bank of Lesotho as a non-bank financial institution.
In the scheme, according to the proposal, there should be a small enterprise facility which will target firms in operation for at least two years with turnover or total assets of less than M3-million.
The SEF will provide loans for both short-term and medium-long term projects.
The maximum value of loans in the SEF’s short term scheme is M1-million which will mature in 12 months.
The guarantor will cover 50 percent of the loan while the administration fee will be two percent.
In the SEF’s medium-long term the maximum loan value will be M1.5-million which will be paid over 60 months and the guarantor will pay 50 percent of the loan.
There will also be the solidarity group facility (SGF) which will target village groups that have formed businesses such as co-operative societies.
The maximum loan for the enterprises falling under the SGF will range between M50 000 and M100 000 payable within 60 months.
The guarantor covers 60 percent of the loan.
The scheme also provides for start-up facilities for newly established firms.
The loan for the SUF ranges between M50 000 and M300 000 payable within 48 months, with the guarantor covering 70 percent of the loan.
The scheme is expected to be sustainable as profits realised will be ploughed back into it.
Such profits will be made through fees charged upon loan application processing.
The Lesotho SMMEs Network co-ordinator, Makama Masitha, said her organisation is ready to embrace the scheme as it will help improve the lives of the many newly graduated university students who have enrolled with the network wanting to start businesses.
Masitha said the network has trained many people who are eager to start businesses but they do not have capital.
“If this scheme is handled well, I am hopeful that it will help many of our people to start their own businesses and those who are already running theirs will be helped to improve them,” Masitha said.
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