By Itumeleng Lipala & Nthabiseng Ratalane
The Central Bank of Lesotho hosted a roundtable discussion on household over-indebtedness agenda on Wednesday the 22nd March 2022 at Lehakoe Recreation and Cultural Center with the purpose of mapping out ways of reversing over indebtedness among salaried workers in Lesotho.
Speaking on behalf of the Minister of Finance and Development Planning Teboho ‘Malisebo Mokeloa mentioned that over-indebtedness is indeed a problem facing Basotho as a nation, which is caused by acquisition of multiple loans from different financial institutions. Workers are in a state where they need to be assisted on matters relating to savings, budgeting, investments and security for them to manage their monthly income.
In response to the squeeze on over-indebtedness, there are root causes of consumer indebtedness in Lesotho, such as micro economic factors, covid-19, and unemployment, salary cuts during the pandemic, businesses liquidating or bankruptcy. Inflation caused by Russia and the Ukraine war is also the root cause of over-indebtedness. MFI charges high interest on loans, inadequate loan affordability conducted by employers and employees credit scheme which result in low salary payment because 70% of it goes to loans while 30% it is a net payment.
The observations and potential solutions which came up during the discussion, were that salaried workers are the target market and all institutions approach the market aggressively because there is a high demand of loans, high interest rates preceding them. The solution to this is that cooperative borrowings should be regulated by Central Bank. ‘’It is the responsibility of every borrower to take loans which they can afford because that will help individuals to not have acquisition of multiple loans from more than one bank or mortgage at a time,’’ Dr. Maluke Letele, the Central Bank Governor.
The deputy governor, Mr Lehlomela Mohapi in conclusion said that credit drives the economy, any meaningful growth of the economy is driven by consumption. Central Bank offers education and training around the country. ”The borrower is a slave to the lender as stated in Proverbs 22:7, and as individuals, we should make sure that 30% or less of our salaries go to our debts while 70% should be meant for personal use or savings.’’ Mohapi recited.