Donor Partner Working Group on Local Governance and Decentralization

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UNCDF in Lesotho

The Challenge

The Kingdom of Lesotho ranks 158 out of 187 countries in the 2012 Human Development Index. Despite significant economic progress from 2006 to 2008, and a per-capita income of USD 1,970 in 2008, about half of the population lives below the international poverty line of US$1.25 a day. The country is vulnerable to severe droughts and other natural disasters, HIV/AIDS, limited resources, high unemployment, and heavy dependence on the South African economy.

In 2011, the Government of Lesotho, along with UKAID funded a FinScope survey of financial inclusion in the country. This showed that financial exclusion is greatest in rural areas, and that whilst similar proportions of men and women used formal financial products, women were more likely than men to access informal products. It also noted that much of the use of formal financial products is driven by demand for funeral insurance.

Lesotho has recognised that there are a great many barriers to financial inclusion in the country, amongst which is a lack of financial education. It is therefore participating in a Joint Programme with UNCDF and UNDP to ensure that interventions are developed to target each of the barriers faced.

How We Are Helping?

UNCDF is working on a 3 year joint programme alongside with the Government and UNDP to stimulate financial service providers to offer pro-poor products as well as facilitating access to financial services for women. The joint programme of UNCDF and UNDP to Support Financial Inclusion in Lesotho (SUFIL) aims to stimulate financial service providers to offer pro-poor products. Working at macro, meso and micro levels, the programme will also facilitate access to financial services for women. UNCDF is also supporting the Ministry of Finance on the formulation of a national strategy that will combine financial education and consumer protection with financial inclusion.

In the area of local development finance, UNCDF provides support to the Government through the Deepening Decentralization Programme (DDP), which promotes decentralized service delivery for social and economic growth through the development of transparent funding mechanism and by improving the accountability of local authorities.


Support Financial Inclusion in Lesotho (SUFIL)

Goal To improve and expand access to sustainable financial services in urban and rural areas by the low income segment of the market, particularly women
  • Improving inclusive financial regulatory and policy environment ;
  • Strengthening of the meso financial infrastructure;
  • Improving and accelerated access to a broader range of financial services.

A second goal specifically aims to:

  • Strengthen the capacity of the Technical Service Providers;
  • Negotiate and implement a consumer education programme in partnership with the Microfinance Forum, the Central Bank, UNICEF, the Ministry of Education and the Coalition of Client Protection;
  • Establish a microfinance resource for the industry, including a sector data base meant to track progress and performance of financial service providers.

Period 2010-2013
Partners UNCDF, UNDP, Government of Lesotho.
Total project cost and UNCDF contribution USD 4,085,000
USD 800,000

Deepening Decentralisation Programme (DDP)

Goal To promote decentralized service delivery for social and economic growth through the development of transparent funding mechanism and by improving the accountability of local authorities.
  • By improving development funding through local authorities. This will involve the design of a local development funding mechanism and performance based grant system managed by the Ministry of Local Government and implemented by the local authorities;
  • By promoting decentralization and accountability systems at local level informed by a diagnostic assessment of the status of decentralization with a focus on institutional arrangements and fiscal decentralization, formulation of Decentralization Policy and refinement of Intergovernmental fiscal transfer system linked to IFMIS;
  • By enhancing the capacities of Line Ministries and local authorities to decentralize functions in particular strengthening the administrative systems and human resource infrastructure to facilitate the process of decentralization.
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