In this insightful interview with Advocate Mothepa Nduma (MN), on behalf of Metro, Mr Maliehe discusses issues surrounding the local financial services sector and its role in building the economy beyond the COVID-19 pandemic.
MN: How would you describe the financial services sector of Lesotho, and the role of a company like Liberty, to the ordinary man and woman walking the streets of our country?
MM: The Financial Services Sector in Lesotho is still dominated by the banking sector and specifically commercial ones. The insurance sector is second in size in terms of asset base. My thinking is that both sectors remain strong amidst the threats imposed by the COVID-19 pandemic - that is, they have strong and resilient balance sheets and will be able to meet their obligations to clients and policy holders, respectively.
This is the period when everyone needs insurance because, by its nature, insurance serves the purpose of assisting clients to manage risk and eliminates the discomfort caused by uncertainties such as death, disability, retrenchment, illness and so on. The COVID-19 pandemic has increased the probability of these eventualities happening and this often gravely affects the lifestyles of the surviving members, for example, dependents such as children, relatives, and so on.
A family member who is a bread winner can lose a job, die, or become hospitalised and if such a family does not have contingency plans, such as insurance or adequate savings, to survive beyond the death of the bread winner, hardships begin. Assets such as §houses and vehicles are repossessed by creditors, children have to downgrade from their current schools and many other lifestyle norms and these manifest into different sorts of mental issues: depression, anxiety, anger, and so on.
These maladaptive reactions to the curveballs that life throws at us in these rapidly changing socio-economic environments can be tough on businesses and the broader economic landscape. Insurance companies like Liberty play a very critical role of protecting the wealth and mental wellbeing of Basotho.
We have solutions that provide the right covers to protect people against eventualities such as death, disability, and critical diseases such as cancer. The dependents will not face the financial hardships brought by the nonexistence of insurance cover.
MN: From a regulatory perspective, what are some of the challenges that the sector faces and how do those challenges constrain our economic development as a country? Any other challenges that you would like to highlight and what suite of solutions would you propose?
MM: The challenges that we face as a sector is the low penetration of insurance in Lesotho because of lack of awareness because insurers just sell and do not provide adequate financial education. Basotho’s prevailing perception of insurance is that of funeral products only and their scope of knowledge is also limited to that. Financial Literacy will help individuals to make informed decisions both in everyday life as well as in the long-term.
These are decisions related to retirement planning, family budgets, investments on children’s education, savings, motor and property insurance, life covers, funeral covers, and so on.
Furthermore, not many people have a good appreciation of how the financial system works, for example, financial markets, inflation, investment portfolios, interest rates, derivatives and so on. As a result, many Basotho experience difficulties when they have to make decisions about various products and services offered by financial institutions.
One of the biggest constraints to our economic development as a country is that, because of the low levels of financial literacy, people are not saving adequately for their retirement and also not protecting their wealth through appropriate life and health covers.
They then strain the already overwrought government coffers because they remain dependent on the state even at retirement or for healthcare if they do not have their own medical aid. Financial Literacy is not only an individual problem but a national issue and should be adopted by members of society without any socio-economic preferences or gender exclusions or biases.
We should all dialogue productively about the economic solutions that are relevant for Basotho and to ease the burden on our Treasury as the different societal stakeholders. Society should therefore trust its financial institutions to guide it on improving its literacy and when making choices of products or solutions. Companies like Liberty can help individuals navigate through the complex maze of financial services and language.