M725 million loan funding for MSMEs
THE small enterprise sector is set to receive a M725 million financial boost courtesy of a World Bank loan to the government, Finance Minister, Thabo Sophonea, has revealed.
The minister said this last Thursday while presenting his 2022/23 budget to the media. This after failing to present it in parliament last Wednesday.
Although it is still unclear when the loan will be availed, Mr Sophonea said it was meant to revive the contribution of micro, small to medium enterprises (MSMEs) towards employment creation.
It is also expected to support private sector investment, increase access to business services and financial products targeted at MSMEs, Mr Sophonea said.
The M725 million loan is being facilitated by the World Bank’s International Development Association (IDA) and the Global Risk Financing Facility (GRiF). The GRiF is also a World Bank arm.
The IDA is focused on helping the world’s poorest countries. It is aimed at reducing poverty by providing zero to low-interest loans and grants for programmes that boost economic growth, reduce inequalities, and improve people’s living conditions.
On the other hand, the GRiF is a multi-donor trust fund (MDTF) with over $200 million in pledges from Germany and the United Kingdom, to help countries design and implement financial solutions to manage disasters and climate shocks.
It provides finance and technical expertise to develop new pre-arranged financing instruments and help existing ones grow. These financial tools and systems help countries, and their people prepare for—and recover more quickly from—the impacts of climate shocks, disasters, and crises.
“The government is in the process of signing a loan agreement with International Development Association (IDA), and Global Risk Financing Facility (GRiF) to the tune of M725 million to support private sector investment and increase access to business services and financial products targeted at MSMEs,” Mr Sophonea said.
While he did not say when the loan agreement would be signed, it is expected to be implemented during the 2022/23 fiscal year.
Part of the funding is targeted at youth and women entrepreneurs, he said.
“Of this amount, M435 million has been earmarked for upscaling support for women and youth entrepreneurship. This facility is targeted at enhancing government to business digital services, building private sector resilience, and upscaling support for entrepreneurship and MSMEs.
“I therefore appeal to women and youths to take advantage of this funding opportunity to start and grow their small enterprises.”
Mr Sophonea said the objective of the financing facility would be attained by establishing an entrepreneurship hub and seed financing facility; upscaling the Lesotho Enterprise Assistance Program (LEAP) for MSMEs; and expanding MSMEs participation in high potential value chains projects.
“The seed financing facility will provide competitive matching grants for entrepreneurs with milestones for monitoring progress to the tune of M75 000 for new small start-up businesses, and M750 000 for larger investments in start-ups that demonstrate traction.”
He added that the government was developing an MSME policy, which would create an enabling environment for development and growth of small businesses. A data management system to register of all MSMEs has already been developed, he said.
“The government, through the assistance of the African Development Bank (AfDB) has launched the Business Plan Competition where around 50 youth start-up businesses will be funded with M100 000 each.
“The government shall continue supporting the revival of our economy through supporting private sector investment, and growing MSMEs especially women and youth. We should also continue tapping into the capabilities of the diaspora to promote investment and improve service delivery in health, education and other sectors.”
He said the government would also modify the efficiency and security of the business licensing and registration systems and enhance integration across different government ministries.