WASHINGTON — The World Bank Group’s Board of Directors approved a $45 million loan for the Government of the Kingdom of Lesotho to increase access to business support services and financial products targeted at micro, small, and medium enterprises (MSMEs) and entrepreneurs, especially women and youth. The project is co-financed by a Global Risk Financing Facility (GRiF) grant in the amount of $7.5 million.
Lesotho, a lower-middle income country, is struggling with persistently high levels of unemployment, informality, inequality, and poverty—all of which have been further exacerbated by the COVID-19 pandemic. It is also facing economic challenges which include a crowding out of the private sector by a large public sector, a lack of diversification, a largely informal small and medium enterprise (SME) sector, and limited support for SMEs and entrepreneurs. The Second National Strategic Development Plan (NSDP II) (2019-2023) identified an uncompetitive business environment as one of the key binding constraints for private investments.
“As our local businesses recover from the devasting impacts of the pandemic, a deliberate government intervention is crucial to stimulate MSMEs’ recovery and competitiveness. This project will provide a timely boost to these enterprises through a digitalization of Government to Business services; improved access to finance, especially for women and youth owned enterprises; a strengthened entrepreneurship ecosystem; and improved SMEs participation in horticulture and apparel value chains,” said Dr. Thabiso Molapo, Honourable Minister of Trade and Industry for Lesotho.
The project is expected to directly support the growth of 500 or more entrepreneurs and small and medium enterprises (SMEs), 50% of which will be women-owned and 25% of which will be youth-owned. It will also support the resilience of 15,000 or more MSMEs to climate related and other shocks.
“Lesotho has tremendous potential to shift from public sector dependent to private sector driven growth. However, the COVID-19 pandemic and repeated climate related shocks have slowed the pace of this transformation. SMEs face business environment challenges and access to finance is challenging, particularly for women-owned businesses given their low credit history,” said Marie Francoise Marie-Nelly, World Bank Country Director for Eswatini, Botswana, Lesotho, Namibia and South Africa. “The Competitiveness and Financial Inclusion project will build the resilience of SMEs and their capacity to weather shocks and successfully compete in regional value chains. It will also unleash the entrepreneurship potential of youth and women.”