International remittance markets in Lesotho: Implications for economic and social development

Abstract

This paper assesses international remittance services in Lesotho. It finds that only a small portion of inward remittances are processed via formal remittance services, with the bulk going through informal channels, which are unsafe and inefficient. Existing commercial bank channels are rarely used, and international money transfer operators have a limited presence in Lesotho. Innovative channels, such as the mobile money services and Shoprite cash-to-cash services, have the potential to substantially formalise inward remittances and encourage the move towards digital payments and broader financial inclusion. However, the market faces numerous challenges, including: a high preference for cash; the limited number of access points and agent networks outside of urban areas; and inefficient interoperability between the commercial banks and mobile network operators, as well as between mobile network operators themselves. This paper argues that the authorities in Lesotho should enhance the payment systems infrastructure, harmonise the legal and regulatory framework, enhance financial literacy and encourage remittance service providers to be more active in the remittance market. In addition, the authorities should clarify the consumer protection and dispute resolution framework for remittance services as well as other financial services.