Lesotho: How the Smallest Businesses Are Driving the Biggest Change

The Lesotho Competitiveness and Financial Inclusion Project aim to increase access to business support services and financial products for micro, small, and medium enterprises and entrepreneurs, especially women and youth-owned businesses.

Enterprises have received grants, mentoring on their business models and plans, and monitoring over an “incubation” period, helping them scale up from start-up/concept stage to an investable stage.

To date Competitiveness and Financial Inclusion Project (CAFI) has supported 464 micro, small, and medium enterprises (SMEs) among them 52 percent women-led and 46 percent youth-led.

CAFI has enabled access to approximately US$2.5 million in finance, and created 2,100 jobs.

The project has established seven commercial farms, supported firms in the textile sector, and digitized government to business services.

Pay Lesotho

“I use technology to support financial inclusion in Lesotho,” says Lerato Masupha, the CEO and founder of Pay Lesotho.

“It has been a difficult but rewarding journey. While we officially started in 2020, this was my second attempt at the business after I had been unsuccessful in previous years. Today we have grown into one of Lesotho’s leading fintech companies, serving over 300 merchants and processing more than M20 million (US$1 million) in transactions every month,” he added.

As Lesotho grappled with the COVID-19 pandemic, and regulations restricted movement in 2020, Lerato sought to bridge the gap by establishing a fintech company to support digital payments.

Armed with a master’s degree in computer systems engineering and a passion for innovation and technology, he designed a platform that integrates normal point-of-sale and mobile money to boost access to digital payments.

The new start up faced the challenges of a growing business and capacity constraints, but luckily, Lerato was able to access business support services and financial products targeted at MSMEs and entrepreneurs through the Lesotho Competitiveness and Financial Inclusion Project (CAFI) in 2023.

The Entrepreneurship Hub and Seed Financing Facility, is a component of CAFI, aims to strengthen entrepreneurship by providing training, mentorship, and early-stage financing to promising businesses across key priority sectors such as Agriculture, Manufacturing, Textile, Creative industries, Tourism and Technology. Pay Lesotho is one of the five cohorts that are taking advantage of this (to date).

The selected entrepreneurs receive mentoring on their business models and plans, and their progress is supported over an “incubation” period, with the goal of scaling from start-up or concept stage to an investable stage.

While most enterprises receive a one-time grant of US$7,000, they need to demonstrate commitment and a clear plan to access it.

The project also supports the training of enterprise support organizations (ESOs), which act as “entrepreneurship accelerators” and provide services and training to aspiring entrepreneurs.

The ESOs provide training and mentorship to the selected enterprises and track their progress over the six-month incubation period. This is done to increase the enterprises’ likelihood of success and to help connect them to relevant industry professionals.

Since inception in 2022, CAFI has supported 464 SMEs (52% women-led and 46% youth-led), enabled access to approximately US$2.5 million in finance, and created 2,100 jobs.

The project has also established seven commercial farms, supported firms in the textile sector, and digitized government to business services.

Pay Lesotho credits the program as being instrumental to their success.

The grant helped the company develop and enhance their Digital Payment Platform that enables businesses to accept payments through mobile money, bank cards, payment links, QR codes, and online payment gateways.

It also provides merchant management, transaction processing, reporting, and value-added services such as airtime, electricity purchases, and digital collections.

“Before joining the CAFI incubation program we had 3 employees. Following the support, mentorship, and business growth enabled by CAFI, we have expanded to 13 full-time employees, while also creating opportunities for agents, merchants, and business partners across the country. More recently, we have expanded to support cross-border digital commerce between Lesotho and South Africa,” says Lerato.

Pay Lesotho enables businesses to accept payments from Visa and Mastercard cardholders worldwide.  The company also supports local mobile money services, including M-Pesa and EcoCash, making it easier for both local and international customers to transact.

As the enterprises span several sectors, twin sisters Thato and Lerato Tśoeute credit the CAFI project as being instrumental in saving their company Gifted Hands, which specializes in carpentry and woodworking.

They joined the program with a bit of skepticism as they were unsure whether they would have to part with equity during the program. They were soon put at ease and found the program eye-opening.

“While our orders were consistent, we had capacity issues that severely affected our liquidity, and this hampered our ability to meet our orders. Our ESO (Eagle Consultancy) quickly got us back on track and improved our systems so that we could continue to deliver efficiently without compromising quality,” says Thato Tsoeute, co-founder of Gifted Hands.

Their new systems allowed them to refine their business model (including pricing) and remove the bottlenecks affecting payments and delivery.

They used the grant to clear their backlog, procure stock, and purchase new equipment. Gifted Hands has increased its cash flow by 30 percent, and the company hopes to secure more and better contracts to enable their business, as well as employees and contractors, to flourish.

Qoane Mothibeli, through his enterprise JuliGerm, is combining artificial intelligence, satellite Earth observation, remote sensing and spatial analytics to transform complex land and environmental data into practical decision-making intelligence.

“While I was in university studying philosophy, I took up farming and realized the hurdles in terms of time and money when approaching institutions for soil test analysis. I then did my research and realized that geospatial intelligence could solve these issues, not just for me but for the whole of Lesotho.”

He joined the program while his enterprise was still at ideation and conducted two successful pilots during his incubation, assisting over 300 potato farmers in land analysis.

Upon completing his incubation and receiving the grant, the company purchased equipment, allocated resources to marketing and operational expenses, and grew to five permanent employees and 20 part-time employees.

A defining milestone in Juli Germ’s development has been its work with the World Food Programme in Lesotho.

Through an agricultural insurance project, JuliGerm was contracted to undertake large-scale geospatial farmer profiling, mapping hundreds of smallholder farmers and approximately 1,750 hectares of agricultural land across multiple districts.

JuliGerm collected and structured farmer information, captured georeferenced household locations, digitized agricultural field boundaries, produced spatial datasets and delivered information that could support agricultural risk management, insurance implementation and program decision-making.

The project demonstrated the company’s ability to move from prototype-level geospatial analysis into field execution for a major international institution.

“JuliGerm exists to make geospatial intelligence operational. Satellite data is incredibly powerful, but its value is only realized when it can help someone decide which farmer to support, which land is suitable, where climate risk is increasing, or where resources should be deployed. Our work is about closing that gap between complex spatial data and real-world decisions,” Qoane shared.

The US$52.5 million CAFI Project is part of the World Bank Group’s support for private sector development in Lesotho and seeks to incubate 500 enterprises by 2028 under the Lesotho Entrepreneurship Hub Program.

The project is designed to improve the business environment and strengthen the resilience of MSMEs in the country, which will improve the livelihoods and economy of Basotho.

In addition to the Hub Program, CAFI also supports the expansion of commercial horticulture farming, revitalization of Lesotho’s textiles and apparel sector, and business environment improvements, including enhancing access to financing and disaster resilience for MSMEs.