ALTHOUGH Lesotho appears to have one of the highest rates of financial inclusion in the Southern African region, issues of customer and financial institution trust remain a huge challenge.
business
May 25, 2023
NEO SENOKO
2 min read
Low credit scores put customer financial freedom in jeopardy - financial expert
Standard Lesotho Bank headquarters in Maseru
Story highlights
A borrower's creditworthiness is indicated by a numerical scale known as a credit score
The CBL estimates that 90 percent of Basotho are financially included
The Central Bank of Lesotho (CBL) estimates that 90 percent of Basotho are financially included; yet, a large number of people are still having difficulty getting loans from appropriate institutions due to their weak credit ratings.
A borrower's creditworthiness is indicated by a numerical scale known as a credit score.
It is based on a person's credit history, which includes the number of open accounts, the sum of all outstanding debts, and the history of timely payments.
In order to assess a borrower's likelihood of timely loan repayment, lenders consider this.
Despite the strong performance of the nation's financially included population—90% coverage—Basotho do not significantly value credit worthiness.
The degree of ignorance in this area is alarming and jeopardises their ability to make sound financial management decisions.
“Credit can help you advance and upgrade the standard of your life. You may find out how creditworthy you are as a person by looking at your credit score. The riskier you are, the worse your credit score. The more reliable you are to institutions, the higher your credit score,” local financial wellness coach Tukiso Nthebe said on Wednesday.
He was addressing a media briefing in Maseru where Standard Lesotho Bank introduced some key initiatives that are meant to make it easier for people to manage their finances.
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“For instance, most of the time, a lot of people have this tendency of assuming that loans can be written off if not well serviced, but in actual fact, that is not true; in fact, they form part of your credit history and therefore affect your credit score and your credit worthiness.”
Nthebe underlined the need for Basotho to take responsibility for their finances and the significance of establishing specific objectives and goals for how the money will be used.
He continued by advising customers to only take what they actually need from the bank, not the maximum amount that is available.
“Another interest rate increase could happen just this week. As a result, if you take out a loan, you must be very responsible and certain that you have the means to pay the monthly installment,” he also said.
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