Inclusive Growth Facility (IGF)

​​Table of Contents

1. Purpose and Strategic Context     .............................................................................................................................3

2. Problem Statement           ......................................................................................................................................................3

3. Facility Design and Structure          .........................................................................................................................3

4. Value Chain and Implementation Model .............................................................................................................. 4

4.1 Stage 1 – Upstream: Enterprise Preparation ..........................................................................................................4

4.2 Stage 2–Intermediation: Credit Assessment and Government Review ................................................................5

     A. Bank Credit Assessment  ...................................................................................................................................................5

     B. MoFDP Investment/Credit Committee Review  ..........................................................................5

4.3 Stage 3 – Disbursement and Post-Lending Support  ...........................................................5

5. Expected Outcomes  .............................................................................................................................................................................6

6. Strategic Rationale ....................................................................................................................................................................................6

7. Macroeconomic and Financial Context..............................................................................................................6

8. Investment and Impact Strategy ....................................................................................................................................7

9. Risk Management Framework ................................................................................................................................................7

     A. Institutional-Level Risk Sharing........................................................................................................................................7

     B. Standard Credit-Process Controls........................................................................................................................7

     C. Operational and Governance Controls.....................................................................................................7

     D. Technical and Capacity Risks .......................................................................................................................................7

10. Pricing and Return Policy .................................................................................................................................................................7

10.1 Lesotho PostBank – Grant Deposit Concessionary Window     ............................................................................8

10.2 FNB Lesotho – Commercial Pricing under Government Guarantee......................................................................8

11. Financial Structure and Sustainability.......................................................................................................................8

12. Institutional Arrangements      ..............................................................................................................................................9

13. Conclusion  ..............................................................................................................................................................................................................9

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IGF Abriged Concept Note 04112025.pdf

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1. Purpose and Strategic Context

This paper is submitted to inform Cabinet on the establishment and operationalization of the Inclusive Growth Facility (IGF) — a national blended-finance and institutional guarantee mechanism designed to enhance access to finance for micro, small, and medium enterprises (MSMEs), with a minimum of 70 % of the portfolio dedicated to youth- and women-led enterprises.

The IGF is a strategic intervention by Government to catalyse private-sector-led growth, generate employment, and strengthen Lesotho’s financial inclusion ecosystem. It aligns with:

• NSDP II – Pillar II: Private-sector-led job creation;

• Vision 2050: Building an inclusive and resilient economy;

• Youth Employment and Empowerment Strategy (YEES); and

• Mission 300: Universal energy-access initiative.

The Facility, capitalised at LSL 400 million, is implemented by the MoFDP in partnership with local Development Finance Institutions (DFIs) and commercial banks, using Credit Guarantee Facilities to de-risk MSME lending at the institutional level.

2. Problem Statement

Access to finance remains a critical constraint on MSME growth and formalisation in Lesotho.

• Only 7 % of MSMEs have ever accessed formal bank credit.

• Collateral requirements and risk aversion among banks limit lending.

• Youth unemployment remains high at approximately 24 %.

• The Partial Credit Guarantee Scheme has been under-utilised and overly client-specific

The IGF responds to these challenges through institution-level Credit Guarantee Facilities combined with technical and business-development support for MSMEs.

3. Facility Design and Structure

Facility Size: LSL 400 million (Government capitalisation)

Capital Mix: Public capital deployed through a Grant Deposit Window (PostBank) and a Guarantee Window (FNB).

Delivery Model: Dual-window model comprising;

• Grant Deposit Lending (PostBank) for concessional MSME credit

• Guarantee-Backed Lending (FNB) providing risk-sharing cover to expand MSME lending

Financial Instrument:     

• Grant Deposit – enabling PostBank to extend development-priced lending

• Guarantee Facility – structured to absorb a share of losses and catalyse broader MSME lending through FNB

Target Sectors: Agribusiness, light manufacturing, renewable energy, textile value chains, and digital/creative industries

Governance: Multi-stakeholder Advisory Committee, IGF Board, and independent Investment Committee; transition to an autonomous Facility Manager within 3–5 years

Technical Assistance: Embedded enterprise-development services, ESG compliance support, digital-business enablement, and post-lending mentorship via DFIs (LNDC, BEDCO, innovation hubs)

PostBank Window:         

Government provides a Grant Deposit of LSL 300 million to enable concessional MSME lending under a development-aligned pricing structure.

FNB Lesotho Window:

Government establishes a Guarantee of LSL 100 million, enabling FNB to lend from its own balance sheet under a risk-sharing arrangement supported by the Guarantee.

Financial Instruments:

• Grant Deposit Lending (PostBank)

• Guarantee-Backed Lending (FNB)

4. Application Process (Application will be uploaded later)

The application process will be carried out using BEDCO’s Business Plan Competition Platform and monitoring will use BEDCO’s Virtual Business Incubation Platform.

This process can be summarized in the following chart: