FinScope MSME Survey Lesotho 2016 * Launch presentation Maseru, - - PowerPoint PPT Presentation
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.
Making financial markets work for the poor
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Maseru, 03 November 2016
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Ministry of Small Business Development, Cooperatives and Marketing - Chair
Ministry of Finance
(Steering Committee deputy chair and funder)
Steering Committee
Cooperatives and Marketing - Chair
Corporation (BEDCO)
FinMark Trust Main Funder
(Project management, technical assistance)
Bureau of Statistics
(Statistical oversight, quality control)
AfricaScope
(Research House)
United Nations Development Programme (Funder)
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systemic change in financial inclusion by providing support to transformation at a country level
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= Comprehensive study focusing on individual entrepreneurs, and owners of micro-, small- and medium enterprises (MSMEs) and their financial services needs FinScope MSME surveys have been conducted in:
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FinScope Consumer Surveys have been conducted in 27 countries, including Lesotho (2011, conducted, a follow-up survey is due)
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Field checks, sample frame and weighting
Enumerator areas (EAs) Using probability proportional to size (PPS) Households Using systematic random sampling 8-12 qualifier households from each EA were selected Individual (MSME owner) via Kish Grid Multi-stage sampling process Comprehensive listing exercise 336 EAs Over 47 000 households, identifying over 4 000 MSME
TOTAL: 2 182
Face-to-face interviews (September 2015 to February 2016, conducted by Africa Scope)
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10 Source: Micro, Small, Medium Enterprises (MSMEs) policy for Lesotho
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Businesses in Lesotho by number of employees %
83 7 4 2 1 3
0 (no employees) 1 (employee) 2 (employees) 3 (employees) 4 (employees) 5+ (employees)
97 3 0.3
Micro-Enterprise Small Enterprise Medium Enterprise
MSME Sector by size of business %
Businesses Percent Micro-Enterprise 73 746 97 Small Enterprise 2 065 3 Medium Enterprise 257 0.3 Total 76 068 100 Based on employees, 97% of MSMEs are in the informal sector
(any age)
(Monthly)
reported on turnover)
118 000 people work in the sector (this number includes 55 000 employed and 63 0000 individual entrepreneurs)
63 191 individual entrepreneurs 12 877 business
employees
83% 17% Important contribution to employment
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LSL/US$ exchange rate in September 2015 (start of fieldwork) = 14.0172
10 14 11 10 25 30 2015/2016 (1 year) 2014 2013 2012 2011-2006 2005 and less (11 years +)
Number of years in business %
36 24 40 Start-up (2 years and less) Growth (between 3 and 5 years) Established (6 years and more)
Business by life cycle %
business for more that 11 years, thus indicating that businesses are either in the growth phase or are established businesses
decline in the formation
compared to 2014
business (64%) have been in business for more than 4 years
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18 1 1 1 1 1 2 3 3 9 10 22 30
Other service activities Electricity, gas, steam Education Professional, scientific technical Real estate activities Human health and social work Construction Arts, entertainment and recreation Transportation and storage Manufacturing Accommodation and food services Agriculture, forestry and fishing Wholesale and retail trade
Most of these activities are retail in nature
%
15 69% sell merchandise in the same form 22% add value and sell 31% Accommodation construction 25% Tourism 53% rear livestock, 15% grow crops 28% sell cooked food 69% Sell bricks, furniture & craft 16% Add value 78% Buy & sell 16% Add value
(75% of MSME reported turnover)
Sector
Turn over Wholesale, retail and repair of motor vehicles 30% 65 000000 Agriculture and Forestry 22% 39 471 000 Other services activities 18% 32 333 000 Accommodation and food services 10% 13 600 000 Manufacturing 9% 12 700 000 Transportation and storage 3% 3 146 000 Business size
Size
Turn over Micro 97% 184 875 500 Small 3% 5 214 250 Medium 0.3% 1 910 250
42 58 Keep financial records Do not keep financial records Financial record keeping %
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LSL/US$ exchange rate in September 2015 (start of fieldwork) = 14.0172
Current focus of interventions
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Total number of registered businesses: about 13 900
94% of those registered, claim to be registered with Lesotho Registration Office
2% claimed registration was in progress
Type of registration %
19 94% Micro-Enterprise 13 054 4% Small Enterprise 616 2% Medium Enterprise 230
94 4 2 97 3 0.3
Micro-Enterprise Small Enterprise Medium Enterprise
Registered Total
3 2 0.3 2 2 5 6 82
Do not know Other Franchise Co-operative Community project Partnership Company Sole proprietor
%
Maloti
by those who registered
*Source: http://www.doingbusiness.org/data/exploreeconomies/Lesotho#starting-a- business
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Perceived benefits of registration %
3 4 4 4 7 24 49 Access to government tenders No benefits/none Avoid fines Avoid harassment from authorities Access to finance Do not know the benefits Comply with the law
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Acquiring business skills
2 2 2 3 7 8 8 9 9 49 Other Spouse University/college School On the job Previous job or work experience Mentor/advisor Training programmes/courses My family Taught myself
themselves
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9 35 29 20 7
Very successful Fairly successful Struggling but promising Struggling but surviving At risk or in danger of failing
business are more likely to be registered, keeping financial records and claim that their businesses performed better than the previous season
Opinions about the business % Acquiring business skills %
4 2 3 4 5 6 6 81 Other National University of Lesotho Ministry of Finance Lesotho National Development Corporation LNDC Trade and Industry The Basotho Enterprises Development Corp. Lesotho Revenue Authority (LRA) None
Organisations made use of (those who are aware)
Corporation 8%
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6 3 3 4 6 8 19 23 24 25 31
Other Support organisation Business association Professional consultant Suppliers Customers Businesses owners Spouse/partner Relatives Friends Do not seek advice
Awareness of Organisations offering support services % Sources of information % About a third of business owners do not seek business advice, while of those who seek business information 72% rely on immediate contacts (family and friends)\
8 13 13 14 19 19 49 None/no problems Being owed money/debtors Too many competitors What product/service to sell Cash flow Not enough customers Sourcing money 24
To start a business %
9 8 13 16 22 26 35
None/no problems Who to sell to Too many competitors Not enough customers Being owed money/debtors Cash flow Sourcing money
Operational constraints %
7 5 5 7 7 15 16 20 Other Transportation Crime and theft Cost of finance Bad weather/natural disasters Competition Space to operate Access to finance
Obstacles to grow the business %
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South Africa (2010) Malawi (2012) Mozambique (2012) Zimbabwe (2012) Lesotho (2016) Business owners 16 years and older 200 employees or less 18 years and older 100 employees or less 18 years and older 100 employees or less 18 years and older 75 employees or less 18 years and older 49 employees or less Estimated adult population 33,5 million 6,1 million 10.8 million 5,9 million 1,1 million Estimated % of adult population that owns MSMEs 17% 13% 42% 46% 7% Number of MSME
5,6 million 760 000 4,5 million 2,8 million 76 068 Number of MSMEs they
6 million 1 million 4,9 million 3,5 million 85 000 % of MSME owners with registered businesses 17% 3% 14% 15% 18% Number of employees 6 million 1 million 850 000 2,9 million 118 000 % of individual entrepreneurs % of businesses with employees 67% 33% 59% 41% 93% 7% 71% 29% 83% 17%
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Total business owner (BO) population = Minimum age defined by the age at which individuals can enter into a
legal financial transaction in their own capacity
Financially included = BOs who have/use
financial products and/or services for business purposes – formal and/or informal
Financially excluded = BOs who do not have/use any
financial products and/or services – if borrowing, they rely
Formally served
= BOs who have/use formal financial products and/or services provided by a formal financial institution (bank and/or non-bank)
Informally served
= BOs who have/use financial products and/or services which are not regulated, e.g. farmer associations, saving clubs/groups, private money lenders
Banked
= BOs who have/use financial products and/or services provided by a commercial bank regulated by the central bank
Served by other formal (non-bank) financial institutions
= BOs who have/use financial products and/or services provided by regulated non-bank formal financial institutions, e.g. insurance companies
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35 38 12 41 45 Excluded Informal Other formal (non-bank) Banked Formally served Overalls with overlaps % 41 4 20 35 Banked Other formal (non-bank) Informal only Excluded Access Strand %
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41 52 40 4 5 20 13 20 35 35 35 Overall Medium/Small Micro Banked Other formal (non-bank) Informal only Excluded %
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41 59 Banked Unbanked
for most of their business banking
the business
branch/ATM themselves
minutes or less
a daily basis
advertising and 22% already had personal account there
banking facilities monthly
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%
8 92 Use mobile money Do not use mobile money
1 3 3 8 47 51 Money transfers between my bank accounts Mobile Money Cash deposits for the business Mobile Money Buy cell phone or airtime for business Mobile Money Paying business accounts with Mobile Money Customer payment Mobile money e.g. Mpesa/Ecocash Using utilities bills Mobile Money
Mobile money usage % Mobile money drivers %
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29 1 25 6 40 Bank savings products Other formal (non-bank) Informal Saving at home only Not saving
40 12 36 1 29 30 Do not save Save at home Informal Other formal (non-bank) Bank savings products Formally served Overalls with overlaps % Saving Strand
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2 0.2 4 3 91
Bank credit Other formal (non-bank) Informal Borrow from family/friends only Not borrowing money
91 3 4 0.2 2 2 Not borrowing Family/friends Informal Other formal (non-bank) Bank credit Formally served
Overalls with overlaps % Credit Strand
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20% attributed ‘access to finance’ to inhibiting growth Main constraint in starting business is ‘access to finance’ 35% of owners reported access to finance limiting
2 98 Business have insurance Not insured
7 9 10 12 12 15 15 Theft of business equipment Rain damage Drought Theft of business stock Compeition Death of business owner Not being paid by debtors
Insurance penetration % Insurable risks experienced %
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Micro Small Medium
(including owner) Less than 5 employees 6 - 20 21 – 50 Annual turnover Less than M200 000 Less than M1 000 000 Less than M5 000 000 Annual turnover Informal Formal Formal
97 3 0.3
Micro- Enterprise Small Enterprise Medium Enterprise
Source: Micro, Small, Medium Enterprises (MSMEs) policy for Lesotho
MSME Sector by size of business %
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(Methodology for constructing the BSM)
A two stage process applied to the data:
in the survey which would best reflect the diversity of business practices in the country.
scope of Lesotho business along a stratified continuum.
analysis using significant variables from the sample weighted data.
solution with 5 clusters
component analysis
– Attitudes and motivations
– Age and gender
– Water electricity and others
– Registered or not
– Have a bank product
– Keep financial records
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(Size and scope of the various segments) 45 41 14
Least sophisticated Emerging Businesses Most sophisticated
MSME Sophistication in Lesotho %
Least sophisticated approx. = 34 456 Emerging Businesses approx. = 30 960 Most sophisticated approx. = 10 652 Total MSME businesses = 76 068
55 44 43 49 45 56 57 51
Least sophisticated Emerging Businesses Most sophisticated Total Urban versus rural divide %
Rural Urban
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66 70 74 34 30 26
Least sophisticated Emerging Businesses Most sophisticated
Seek business advice from
Yes No
Provider of business advice Least sophisticated Emerging Businesses Most sophisticated Spouse/partner 21% 23% 31% Friends 16% 15% 14% Other small business owners 12% 13% 13% Relatives 8% 6% 8% Customers 2% 3% 2% Professional consultant 2% 3% 1% Suppliers 1% 1% 1% Business association 0% 0% 1% Small business support
1% 1% 1% Other or do no seek advice 36% 32% 27%
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3 4 7 7 9 11
Least sophisticated Emerging Businesses Most sophisticated Export to customer outside Lesotho Suppliers outside of Lesotho
exports, a targeted approach aimed at those businesses actually involved with export business would yield higher returns on investment.
%
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42 48 48 30 28 31 17 16 13 6 5 3 4 3 5 Least sophisticated Emerging Businesses Most sophisticated Better The same Worse Just starting out Can’t say/don’t know
%
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39 43 51 61 57 9
Least sophisticated Emerging Businesses Most sophisticated Yes No
%
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35 42 57 41 4 4 5 4 21 21 12 20 40 33 25 35 Least sophisticated Emerging Businesses Most sophisticated Total
Bank Other formal non-bank Informal mechanism only Excluded
with a commercial bank.
focussing on banking these businesses financial inclusion in the country can be much improved.
located in urban areas and display characteristics which could cause them to be banked with commercial banks.
dramatically improve financial inclusion.
%
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60 53 68 3 6 4 37 41 28
Least sophisticated Emerging Businesses Most sophisticated Go yourself Send someone else Don’t go to the bank
work 8 hours a day
bank themselves
needs for mobile and internet banking facilities %
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(Challenges)
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23 30 41 29 1 1 23 27 22 25 7 5 5 6 46 36 31 40 Least sophisticated Emerging Businesses Most sophisticated Total
Bank Other formal (non-bank) Informal Home only Not saving
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business
the law
Government tenders
motivation to register
Registration and licensing of MSME's
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currently employed
000 by 2018
increased employment
e.g. tax relief
incentives MSME contribution to employment
targets -from 19% currently to 40% by 2018
focus approach
education at college/university level Need for skills training
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business plan
advertising the business
address
website
access
training facilities
venture to market their business (networking, referrals, local business directories, radio, billboards, local newspapers)
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residential premises
to operate as a challenge to growth
creation of MSME business hubs
improvements
space issue with regards to availability and affordability
water, electricity and sanitation
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are in agricultural sector
financially served
biggest operational challenge
licensed/registered
businesses say they are struggling
and flexible solutions to cover seasonal input and fixed assets (agri finance);
agricultural insurance;
development
access
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products and services that are:
income)
irregularity of income)
worked)
microfinance institutions that could serve the purpose of grooming the MSMEs to a point where they are bankable
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finance a challenge to start business
from a bank is difficult
businesses have borrowed money from a bank
their last loan was under M1 000
period was under 3 months
needed less than M 1 000 to start the business
received money from savings group
family
currently borrowing, 7% borrowed money from informal sources or friend and family
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Least sophisticated Emerging Businesses Most sophisticated Total Market Total market 34 488 30 881 10 699 76 068 Professional advice source Professional consultant 648 1029 125 1802 Government institution 160 96 14 270 Small business support organisation 251 392 65 708 Business association 69 8 97 174 Currently using professional advice 1128 1525 301 2954 Potential Market 33 359 29 356 10 398 73 113 Possible gains 10% 40% 60% Probable market 3 336 11 742 6 239 21 317
MSME sector. It is estimated that the potential size of the BDS market for various services could be as high as 21 000 businesses.
segment, 40% of the emerging segment and 60% of the most sophisticated:
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Least sophisticated Emerging Businesses Most sophisticated Total Market Total market 34 488 30 881 10 699 76 068 Currently registered 5618 5507 2774 13899 Potential Market 28 869 25 374 7 925 62 168 Possible gains 10% 40% 60% Probable market 2 887 10 150 4 755 17 792
the reasons why businesses say that they are not registered. The majority provide the following reasons: Business is too small No benefit to registering Process too complicated Do not have the money to register
registered.
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The banking sector could increase the number of banked businesses, through product and service innovation, (particularly Mobile and Internet Banking) by over 12 000. This estimate is arrived at by looking at the size of each BSM, taking the number
attract, from the potential market, 10% of the least sophisticated segment, 40% of the emerging segment and 60% of the most sophisticated:
Potential banking increase Least sophisticated Emerging Businesses Most sophisticated Total Market Total market 34 488 30 881 10 699 76 068 Currently banked 11 929 12 969 6 075 30 973 Potential Market 22 558 17 912 4 624 45 094 Possible gains 10% 40% 60% Probable market 2 256 7 165 2 774 12 195
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www.finmark.org.za For more information on FinScope MSME Survey Lesotho 2016 please contact: Dr Kingstone Mutsonziwa Kingstonem@finmark.org.za Mr Jabulani Khumalo jabulanik@finmark.org.za Tel: +27 11 315 9197 www.finmark.org.za
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