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Credit unions want to control M50million credit scheme

Former Minister of Finance Timothy Thahane


May 10, 2021 4 min read

4 min read


CREDIT unions are willing to take charge of the M50million Partial Credit Guarantee Fund (PCGF) that was introduced by government in 2011.

PCGF was established to support Small, Micro and Medium Enterprises (SMMEs) that are credit worthy but do not have adequate collateral security to obtain loans from the commercial banks.

The government took this initiative to liberate SMMEs from the burden of limited access to finance by the private sector.

The credit is provided by commercial banks on viable and bankable projects while the PCGF provides partial collateral security.

Under the programme, applicants must submit their bankable projects directly to the banks. The banks then provide their unqualified approval to PCFG for guarantee certificate.

The fund provides 50/50 guarantee coverage for existing businesses and 70/30 guarantee coverage for start-ups. The loan amount to be guaranteed is not supposed to exceed M5million while there is no lower limit.  

Currently under the guidance of the Ministry of Small Business Development, Cooperatives and Marketing, the initiative has not done much to assist the Small, Micro and Medium Enterprises (SMMEs).

Only a small portion of businesses has so far benefited through this government initiative.

According to the World Bank, the project had benefited only 16 borrowers in 2013, roughly two years after its establishment. The uptake was low as banks still found it difficult to find bankable borrowers. 

Several challenges including political influence continue to affect progress and success of the initiative nine years after being introduced by the then Minister of Finance Dr Timothy Thahane.

Since its introduction, the initiative is yet to fulfil its purpose and the SMME sector continues to suffer.

The initiative was prompted by the fact that banks had problems lending money to Basotho because of lack of collateral among other things.

As result, the two parties - the government and commercial banks, agreed on working terms through a Memorandum of Understanding and successfully launched the programme.

The Minister of Small businesses Chief Thesele Maseribane said a ford night ago that some credit unions in the country are vying to take charge of the programme.


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He said the initiative is failing to make an impact partly due to political influence.

This, he said during the launch of another programme, “Sethala” which seeks to ensure that solemn continuous discussions are held between the public and the private sector to discuss and resolve some of the challenges and remove barriers like finance and market access.

“The scheme has its own challenges. It is failing to support the SMMEs in the country and therefore, some credit unions are requesting to take charge of it. We also believe it has to be reformed so that it becomes easily accessible,” Chief ’Maseribane also said.

Continuous engagements between stakeholders will continue until a solution is reached on how best the initiative can succeed. Many government-funded partial credit guarantee programmes have led to elite capture where elite groups took advantage of such programmes.                                                                                                                                                                                                                                                                                                                                                                      

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