The smooth functioning of a country’s economy depends heavily on the efficiency of its payment systems. In Lesotho, the Central Bank plays a pivotal role in regulating and supervising the structures that allow money to move safely and efficiently across institutions, businesses, and individuals. While the national payment framework remains largely manual in its operations, it is anchored in legal oversight, institutional collaboration, and a growing network of both traditional and digital payment tools.
Institutional and Legal Framework
Lesotho’s payment system is governed primarily through the supervisory authority of the Central Bank of Lesotho (CBL), empowered by the Financial Institutions Act of 1973. While no specific legislation governs clearing and settlement operations, the CBL enforces its own clearing house rules to maintain order and accountability among participating banks. In cases of financial instability or misconduct, the CBL, upon ministerial approval, has the authority to intervene directly by appointing administrators to stabilise affected institutions.
In addition to commercial banks, public bodies such as the Post Office and development banks offer payment-related services. For instance, the Post Office issues postal orders widely accepted as an equivalent to cheques. The Employment Bureau of Africa (TEBA) also facilitates bulk payments to migrant workers in the mining sector, further expanding the reach of non-bank financial services.
Central Bank’s Core Role
The CBL is not only the issuer of the local currency, the loti, but also acts as a central clearing hub for interbank settlements. It maintains accounts for commercial banks and key government departments, ensuring that high-value transactions between institutions are reconciled efficiently. Although the discount rate remains an underutilised tool due to high liquidity levels in local banks, the CBL continues to conduct monetary policy through other mechanisms like reserve requirements and open market operations.
As a custodian of public funds, the CBL also processes payments on behalf of the Treasury, often based on formally authorised instructions. It chairs monthly meetings with commercial banks to address operational and strategic issues affecting the financial system.
Payment Channels and Instruments
Despite ongoing infrastructural improvements, Lesotho’s payment ecosystem is still reliant on a combination of manual and electronic processes. Cash remains the most frequently used method, with denominations ranging from M5 notes to M200, alongside a full suite of coins.
Non-cash payment mechanisms include:
- Credit transfers, both via mail and the SWIFT system, which are predominantly used by commercial banks and the CBL’s Forex Division.
- Cheques, still popular for payments such as salaries, pensions, and procurement, although only commercial banks are authorised to issue them.
- Direct debits, commonly used for recurring payments such as insurance premiums.
- Payment cards, including both credit cards and ATM cards that function via the Saswitch network—a collaborative banking arrangement facilitating cross-bank transactions.
The successful operation of ATMs depends on telecommunication infrastructure, which, while improving, remains inconsistent in rural areas. Still, districts such as Butha-Buthe, Leribe, and Roma have access to functioning ATMs when connectivity allows.
Interbank Settlement and International Transfers
Interbank transfers in Lesotho are coordinated daily through the Central Bank’s clearing house. Each transaction is manually reconciled using straightforward tools and processes, with net settlements calculated and applied to each participant’s account held with the CBL. This ensures accurate posting of credits and debits across the banking network.
For international transactions, the SWIFT system remains the primary channel, with cross-border transfers facilitated through correspondent accounts at the South African Reserve Bank and the Federal Reserve Bank of New York. Most foreign currency transactions involve the US dollar, British pound, or Swiss franc, though on a relatively limited scale.
Infrastructure and Accessibility
Lesotho’s financial infrastructure is supported by growing investments in roads, telecommunications, and electricity, particularly in rural areas. These developments are essential for ensuring equitable access to banking services and modernising payment technologies.
As of the latest data, the country hosts three commercial banks with 16 branches and over 370,000 active accounts. The Post Office network, with its 47 branches, remains a crucial vehicle for reaching underserved areas.
Conclusion
Lesotho’s payment system, though largely traditional in operation, is governed by a sound legal and institutional framework. The Central Bank’s oversight, combined with the involvement of both public and private sector players, ensures a stable yet evolving financial environment. As infrastructure and technology continue to improve, opportunities abound for digitising payments, expanding financial inclusion, and enhancing the country’s integration into global financial systems.