This information is derived from the State Department's Office of Investment Affairs’ Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov
Last Published: 11/1/2016

The regulatory system is not effectively established to encourage and facilitate portfolio investment. The stock of portfolio investment liabilities amounted to $12.6 million at the end of 2009 and comprised mostly bonds. Lesotho’s capital market is relatively underdeveloped, with no secondary market for capital market transactions. The GOL issued treasury bonds at the end of 2010 to more broadly develop capital markets in Lesotho. On December, 12th 2014, the Central Bank of Lesotho published the Capital Markets Regulations, which are contained in the Government Gazette No. 76, and will govern operations of the stock exchange. In January 2016 a credit bureau and a securities market were launched, the latest in a long series of incremental steps by the government to further improve access to finance for the private sector. The credit bureau, run by Compuscan, a South African credit bureau, will facilitate the exchange of consumer credit information among credit providers to enable them to make better assessments of risk and promote responsible borrowing and lending practices. The securities market will increase the ability of businesses to raise medium to long-term capital. The trading of government bonds; corporate bonds and company shares is strictly electronic—there is no physical building—and will be initially operated by the Central Bank of Lesotho until the private sector can take over. Although the market was formally launched on January 22, there are not yet any companies listed or securities being traded.

The government accepted the obligations of IMF Article VIII in 1997, and continues to refrain from imposing restrictions on the making of payments and transfers for current international transactions.

Credit is allocated on market terms, and foreign investors are able to get credit on the local market. . However, the banking sector is characterized by conservative lending guidelines, high interest rates, and large collateral requirements. According to the IMF, as a result of structural reforms implemented under the first Millennium Challenge Corporation program, private sector credit is growing. LNDC does not provide credit to foreign investors but can acquire equity in foreign companies investing in strategic economic sectors. The private sector has access to a limited number of credit instruments, such as credit cards, loans, overdrafts, checks, and letters of credit.

Money and Banking System, Hostile Takeovers

Three South African banks account for almost 95% of the country's banking assets, which totaled over M14,814,466 ($911.6 million) in January 2016. According to the CBL, the banking system is sound—commercial banks in Lesotho are well-capitalized, liquid, and compliant with international banking standards. Foreigners are allowed to establish a bank account and may hold foreign currency accounts in local banks; however, they are required to provide a residence permit as a precondition for opening a bank account to comply with the “know your customer” requirements.

Lesotho does not have a competition law; other existing legislation is silent on measures to prevent hostile takeovers.

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