From inclusion to growth: How women’s financial access can fuel Lesotho’s economy: World Bank Blog By Maria Emilia Cucagna, Ajai Nair and Toni Weis
Maseru, Lesotho (PANA) - After years of sluggish growth, Lesotho is at a crossroads. To boost its economy and create more jobs, the country needs a stronger, more vibrant private sector. And in many ways, that future lies in the hands of women.
Most of Lesotho’s entrepreneurs are women — running farms, shops, and small manufacturing businesses across the country. Yet, their businesses tend to be smaller, employ fewer people, and operate in sectors that earn lower profits. And with male-owned firms holding over 75% of all capital in the small business sector, women entrepreneurs need formal lenders to help them catch up.
“If my only financing option is a bank, then my business idea is nothing but an unrealistic fantasy,” said one tech entrepreneur at a recent business roundtable in Lesotho. Her words seem to reflect a common feeling among businesswomen across the country — that the financial system simply is not built with their needs in mind.
We looked at data from the Finscope 2023 Survey and it seems to validate this perception. It finds that while the share of micro, small, and medium enterprises (MSMEs) having access to credit from formal sources has increased significantly, from 2% in 2016 to 10% in 2023, this masks stark gender differentials both in the number and the size of loans accessed. Women are less likely to borrow from formal financial institutions, and much less likely to borrow from banks (4% compared to 10% for men).
Recognising this challenge, Lesotho’s second National Financial Inclusion Strategy (NFIS II) aims to expand financial access for all — with a specific focus on women and women-led businesses.
To help inform implementation of this strategy, we at the World Bank’s Africa Gender Innovation Lab (GIL) and the Finance, Competitiveness & Investment (FCI) unit took a close look at what the data says— analysing information on individuals, microenterprises, and Small and Medium-size Enterprises (SME) from recent editions of the Global Findex, FinScope, and the World Bank Enterprise Survey.
We also sat down with local entrepreneurs from the World Bank-funded Competitiveness and Financial Inclusion (CAFI) Project to hear directly about the barriers they face.
The findings — shared at a recent workshop in Maseru to launch the NFIS II — paint a clear picture: gender gaps persist across almost every aspect of financial inclusion, from access to basic services to SME finance.
Three actions matter the most to increase women’s access to financial services and boost growth:
Help Women Formalize Their Businesses
A key barrier is formality — or the lack of it. Finscope 2023 finds that just 18% of microenterprises report being formally registered, with male-led firms twice as likely to be registered as female-led ones (Figure 1). However, most of the unregistered businesses are willing to register if registration were free, benefits clearer, and the process less time consuming.
When it comes to accessing finance, formalisation matters. Registered businesses are more likely to get bank loans, qualify for government support, and build a track record with lenders. For many women, however, the process of registration feels complicated, costly, or unnecessary. Some may feel their businesses are too small to warrant formal status; others may simply lack the information they need to get started.
Governments can make formalization easier — by lowering fees, simplifying processes, or offering incentives. One option is to combine support on registering a business with an opportunity to open a business bank account. GIL evidence from Malawi suggests that this approach is cost-effective and increases the use of financial services after formalisation.
Build on Mobile Money to provide Financial Services to Businesses
One of Lesotho’s biggest financial inclusion success stories in recent years has been the rise of mobile money. According to Finscope, today, more than half of the microenterprises have access to mobile financial services — and women, in particular, are leading the way in adoption. In fact, women-led microenterprises are now more likely to have mobile money accounts than traditional bank accounts. Yet, only a very small proportion of microenterprises borrow from formal sources
This presents a clear opportunity for mobile credit. If mobile money platforms extend their services to include loans and other financial services for businesses, they could drive significant growth in Lesotho.
Women, in particular, stand to benefit, given how many are already using these platforms. To make this leap, mobile money platforms need to better leverage their participation in Lesotho’s payment and credit infrastructure, such as the LeSwitch and the Credit Bureau, and enter into partnerships with banks and non-bank lenders.
Support Women’s Access to Larger Loans
One of the most striking differences between microenterprises led by men and women is not from where and how much they borrow — but why. According to FinScope, men report taking out loans to invest in growth: buying new equipment, expanding their businesses, or launching new products.
Women, on the other hand, report borrowing for their day-to-day needs — purchasing inventory or smoothing cash flow (Figure 3A). This matters. Growth financing is what allows businesses to expand, hire more workers, and move into higher-value sectors.
Challenges faced by women entrepreneurs are not restricted to micro-enterprises. The 2023 Enterprise Survey for Lesotho finds that SMEs managed by women receive loans that are 25% smaller on average. At the same time, one-third of women managers say they do not apply for credit because they assume their application will be rejected (Figure 3B).
This highlights the need for focused support for women-led enterprises across the size spectrum – through better financial products, improved outreach to build trust and confidence, financial education, and business support and mentoring. This can go a long way toward helping women see formal lenders not as barriers, but as partners in growth.
Looking Ahead
By supporting women to formalize their businesses, building on the mobile money revolution to expand digital financial services to businesses, and supporting women to access larger and longer-term capital, NFIS II can build a more inclusive financial system in Lesotho — one that drives growth and employment for everyone.
-0- PANA AR/MA 13May2025
