The Lesotho PostBank, with the support of IFAD, and under the Rural Finance Intermediation Programme(RUFIP) will be introducing micro-financing, in Lesotho.

Micro Financing refers to the provision of small or as the name suggests micro financial services targeting the unbanked and under banked market and include savings products, loans, micro leasing, micro insurance and remittances/money transfers.

This business concept strikes a harmonious cord with the Lesotho PostBank’s mandate of banking the un-banked. The Lesotho PostBank will thus launch micro loan products for the active poor. The active poor are clients engaged in some form of micro enterprises.

The main differentiator that makes micro financing work for the active poor is that it makes use of collateral substitutes in the absence of the conventional collateral. Collateral substitutes can be – compulsory savings (a percentage of the required loan facility), peer pressure and some co-guaranteeing from fellow group members in case of group lending methodology.