FinScope MSME Survey Lesotho 2016 * Launch presentation Maseru, 03 November 2016 Making financial markets work for the poor
Contents 1. Introduction, background and methodology of the survey 2. Size and scope of the MSME sector 3. Capacity to grow & Challenges 4. Summary 5. Financial inclusion 6. Business sophistication measure (BSM) 7. Conclusions and recommendations 2
Partnering for a common purpose, inclusivity and capacity building Ministry of Small Business Development, Cooperatives and Marketing - Chair Ministry of Finance Steering Committee (Steering Committee deputy chair and funder) • Ministry of Small Business Development, Cooperatives and Marketing - Chair • Ministry of Finance – Deputy Chair United Nations Development • FinMark Trust Programme (Funder) • AfricaScope • Bureau of Statistics (BOS) FinMark Trust • United Nations Development Programme Main Funder • Ministry of Development Panning (Project management, technical assistance) • Ministry of Agriculture and Food Security • Basuto Enterprises Development Corporation (BEDCO) Bureau of Statistics • Central Bank of Lesotho (Statistical oversight, quality control) • Lesotho Chamber of Commerce & Industry • Private Sector Foundation of Lesotho AfricaScope (Research House) 3
About FinMark Trust • Independent trust formed in April 2002 • Initial and core funding from the UKAid from the Department for International Development. Other donors are now on board. • Mission : “Making Financial Markets Work for the Poor” • Aim : Facilitating and catalysing development around access to financial services • How : Moving beyond data production, with an increased focus on being a catalyst to systemic change in financial inclusion by providing support to transformation at a country level 4
Introduction and background FinScope Consumer Surveys FinScope MSME Survey have been conducted in 27 countries, including Lesotho = Comprehensive study focusing on (2011, conducted, a follow-up individual entrepreneurs, and owners of survey is due) micro-, small- and medium enterprises (MSMEs) and their financial services needs FinScope MSME surveys have been conducted in: • Zambia (2009) • South Africa (2010) • Tanzania (2010) • Malawi (2012) • Mozambique (2012) • Zimbabwe (2012) • Lesotho (2016) • Currently underway in Swaziland 5
Objectives of FinScope MSME Survey Lesotho 2016 • To assess the size and scope of micro, small, and medium enterprises (MSMEs) in Lesotho • To describe the levels and landscape of access to financial products and services (both formal and informal) • To identify the most binding constraints to MSMEs development and growth with a focus on access to financial markets • To identify and describe different market segments with specific development needs in order to stimulate segment related innovation • To propose recommendations regarding financial access by MSMEs as well as development policies 6
Lesotho MSME Policy: Priority Intervention areas • Enabling legal and regulatory environment; • Entrepreneurship training and skills development; • Technological development and innovation; • Access to finance; • Infrastructure development and business shelter; and • Access to markets, including the development of MSME clusters; Cross-cutting areas: These are as follows: Gender in development and women economic empowerment in MSME development; Youth and economic empowerment in MSME development; HIV and AIDS and dealing with other marginalised groups such as persons living with disability, and 7 Managing the environment.
Survey methodology Multi-stage sampling process Comprehensive Target population listing exercise Nationally representative Enumerator areas (EAs) sample of small business Using probability proportional to 336 EAs size (PPS) owners who: • Over 47 000 Are 18 years or older households, • Households Perceive themselves identifying over Using systematic random to be business 4 000 MSME sampling owners/ generating owners 8-12 qualifier households from an income through each EA were selected TOTAL: 2 182 business activities Face-to-face • Employing ANY interviews number of people Individual (MSME owner) (September 2015 to February 2016, (including individual via Kish Grid conducted by Africa entrepreneurs Scope ) without any Field checks, sample frame and weighting employees) 8 of the data was conducted by AfricaScope
1. Introduction, background and methodology of the survey 2. Size and scope of the MSME sector 3. Capacity to grow and Challenges 4. Summary 5. Financial inclusion 6. Business sophistication measure (BSM) 7. Conclusions and recommendations 9
Defining MSMEs for this survey By the number of employees and annual turnover Micro Small Medium No. of employees Less than 5 6 - 20 21 – 50 (including owner) employees Less than Less than Less than Annual turnover M200 000 M1 000 000 M5 000 000 Legal structure Informal Formal Formal Source: Micro, Small, Medium Enterprises (MSMEs) policy for Lesotho 10
Size: Percentage of MSME owners MSME Sector by size of business % Businesses in Lesotho by number of employees % 97 3 5+ (employees) 4 (employees) 1 2 3 (employees) 3 0.3 Micro-Enterprise Small Enterprise Medium 4 2 (employees) Enterprise 7 1 (employee) Businesses Percent 0 (no employees) 83 Micro-Enterprise 73 746 97 Small Enterprise 2 065 3 Medium Enterprise 257 0.3 Total 76 068 100 11 Based on employees, 97% of MSMEs are in the informal sector
Size and scope of the MSME sector 118 000 people work in the sector (this number includes Owning Estimated 55 000 employed and 63 0000 individual entrepreneurs) turnover 76 068 Employing 85 173 (Monthly) 54 939 192 million MSME MSMEs people Maloti owners (any age) (75% of MSME owners 63 191 individual 83% entrepreneurs reported on turnover) 12 877 business 17% owners with Important contribution to employment employees LSL/US$ exchange rate in September 2015 (start of fieldwork) = 14.0172 12
Age of business Number of years in business % 30 25 30% have been in 14 11 10 10 business for more that 11 years, thus indicating that businesses are 2015/2016 2014 2013 2012 2011-2006 2005 and either in the growth (1 year) less (11 phase or are established years +) businesses There was a slight Business by life cycle % decline in the formation 40 36 of business in 2015/2016 compared to 2014 24 The majority of the business (64%) have been in business for more than 4 years Start-up (2 years and Growth (between 3 and Established (6 years and 13 less) 5 years) more)
Macro trends in Lesotho 14
Business Sector 69% sell merchandise 31% in the same 53% rear % Accommodation form livestock, Wholesale and retail trade 30 construction Agriculture, forestry and fishing 22 22% add 69% Sell value and 15% bricks, Accommodation and food services 10 28% sell sell grow furniture cooked crops & craft food Manufacturing 9 25% Transportation and storage 3 16% Tourism Add value Arts, entertainment and recreation 3 Construction 2 Human health and social work 1 Real estate activities 1 Professional, scientific technical 1 Education 1 78% Buy & sell Electricity, gas, steam 1 Other service activities 18 16% Most of these activities are retail in nature 15 Add value
Estimated turnover of the sector LSL/US$ exchange rate in September 2015 (start of fieldwork) = 14.0172 Size Sector Turn over Estimated turnover Wholesale, retail and 30% 65 000000 (monthly) repair of motor vehicles 192 million Maloti Agriculture and Forestry 22% 39 471 000 (75% of MSME reported turnover) Other services activities 18% 32 333 000 Accommodation and food Financial record keeping % 10% 13 600 000 services Manufacturing 9% 12 700 000 Transportation and 42 3% 3 146 000 storage 58 Business size Size Turn over Micro 97% 184 875 500 Keep financial records Small 3% 5 214 250 Do not keep financial records Medium 0.3% 1 910 250 17
Below the surface Current focus of interventions Formal (registered) MSME 18% sector (13 899) 81% Informal MSME sector (61 800) Licensed Business (13 262) 17% Unlicensed Business(62 806) 83% Limited (financial) resources and information preclude the possibility of spreading policy initiatives to include the entire MSME sector FinScope MSME Survey 18
Registered MSMEs Total number of registered businesses: about 13 900 Type of registration % % 97 Sole proprietor 82 94 Company 6 Partnership 5 Community project 2 4 3 Co-operative 2 2 0.3 Franchise 0.3 Micro-Enterprise Small Enterprise Medium Enterprise Other 2 Registered Total Do not know 3 94% Micro-Enterprise 13 054 4% Small Enterprise 616 2% Medium Enterprise 230 94% of those registered, claim to be registered with 19 Lesotho Registration Office 2% claimed registration was in progress
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