Ramaili approves M50million LNDC credit guarantees in 3months, extends funding to start-ups

By Nthakoana Ngatane

MASERU – The not so new Chief Executive Officer of the Lesotho National Development Corporation, LNDC, Molise Ramaili has been in office for 4 months now, but more businesses than before are smiling all the way to the bank.

Ramaili joined the corporation in May this year, but it had launched its partial credit guarantee scheme in 2011 to facilitate better access to finance for businesses.

The scheme is intended to bridge the gap between the needs of small and medium enterprises for access to finance, and the stringent requirements of commercial banks and their shareholders.

However, since its inception up to April 2021, only 79 loans were supported in ten years, valued at M62million.

Ramaili has taken it up a notch, and during his tenure from May to September 2021, guarantees for 24 loans were approved, and their value has surpassed the whole of the past year, and is fast catching up with the total for the past 10 years.

“Since my arrival, all the facilities I have approved are around M49.8million and that has been done within a space of 3 months. One of the first things I did when I arrived was to talk to the banks and encouraged them to forward applications for business loans so that we can back them.” says Ramaili.

The CEO says he has brought down the approval times for the scheme from multiple weeks which was very long, to less than one week.

“I have made sure the credit committee meets timeously. As soon as we receive an application from a commercial bank, we give it two days, the credit committee sits down to discuss the application, after two days it is escalated to my office where I sit down with the company secretary to set up a meeting with the investment committee which is a subcommittee of the board, and the application does not take more than 4 days. So, I think since my arrival I have made sure that all applications that come from commercial banks are approved within 5 days from the time of receipt at our offices at LNDC.” Says Ramaili.

Prior to his arrival, 51 of the loans valued at M34.4million were approved from 2011 up to 2020 – an average of a mere M3.2million a year. The other 28 guarantees valued at M27.7million – were approved between April 2020 and April 2021.

The reason for that increase was that in April 2020 the board of directors restructured the scheme to respond to the effects of Covid-19 on the economy, and to improve its impact and reach.

The newly approved scheme increased cover from 50% to 75% of the loan, waived all fees, it now covers all sectors and business activities except normal negative list activities, and increased the maximum guarantee amount from M5million to M8million.

Ramaili is a former banker who spent the past 10 years working in credit for various commercial banks and financial institutions, so he is familiar with how risk averse banks can be, especially in Lesotho.

“At the moment we are reliant on commercial banks, and they have their own credit policies. It is evident that when a person applies for funding the bank looks at their credit record and they should have a clear track record in how they have been operating in their businesses.” Says Ramaili.

He says upon his arrival he made it his priority to expedite approvals for the partial credit guarantees that must be minimum M200,000 and maximum M8million.

“It’s very easy for us to approve facilities that are below M2million because the delegation of authority of the CEO falls within M2million. It’s very easy for the credit committee to sit down to review the applications and the CEO will sign, as long as the guarantee is below M2million.” He says.

Ramaili also has his eye on start-ups, which were previously excluded by the scheme and banks that want a business track record, a credit record and collateral. He says they too should benefit from the partial credit guarantee scheme.

One of the initiatives on the cards is the Lesotho supplier development programme where LNDC will give access to finance for start-ups in the farming sector, and another scheme that will also be opened will be called supply finance.

“So for any company that has a clear purchase order from a government ministry or a reputable entity, based on how we will agree that the scheme is going to operate, we are going to finance that particular start-up to purchase the goods that it is supplying to the ministry or company. The payment will come to us as LNDC, we will withhold the funds we have financed the entity with, and the remainder of the payment will be delivered to the entity.”

Ramaili says this new initiative will be implemented in the near future.

“It was already part of our strategy, but we deferred it for some time. However, we agreed internally that it is high time that we prioritise this particular concept and in the next three months we will have implemented it” he says.

One of the biggest challenges facing SME’s and start-ups in Lesotho is delayed payments by government departments, and many end up cash-strapped or fail completely as a result. It seems LNDC’s involvement may also see the corporation helping to ensure that payments are made on time, and businesses thrive.

To this Ramaili says: “As LNDC we will be able to push payments for suppliers. So, if government pays us directly it will work to the advantage of suppliers because we will be able to follow up with the ministry of finance and the private sector to ensure that suppliers are paid on time. That will resolve the problem that we have now.”