The role of non-bank financial intermediation in Lesotho Challenges and possible remedies

FINANCIAL INTERMEDIATION is the role that is traditionally dominated by the banking sector, with little or no space for the non-banks financial institutions. However, this is not the case in developing countries, either due to topology or relative development of the financial system. The purpose of this study is to evaluate the role and impact of the non-bank financial intermediaries in discharging their roles in Lesotho.

These institutions have penetrated the country into the rural mountainous areas, and they offer healthy financial system by invoking competition with the banking sector, while also attending to the gap that is left unattended by the former. As a result, Lesotho ranks high on financial inclusion given that majority of services are offered by the informal and auxiliary establishments in the financial sector. However, the authorities have to consolidate on prudential supervision in order to minimise risk that may result from the aggressive offering from the NBFIs in all its various formations.