Behind the Numbers: A Story of Grit and Informal Innovation in Lesotho’s MSME
In 2016, deep in the mountain kingdom of Lesotho, our company, contracted by FinMark Trust with UNDP funding, helped illuminate the lifeblood of the nation’s economy: its micro, small and medium enterprises (MSMEs). What we found was inspiring. An estimated 120,000 people were involved in the MSME sector—many of them women, most of them over 30, and the vast majority self-taught entrepreneurs running unregistered businesses from their homes or street corners.
These MSMEs turned over at least M192 million a month, despite operating with limited access to finance, low business sophistication, and tight margins. Only 18% of businesses were registered, yet these enterprises provided not just income but also a buffer against deeper poverty in one of the world’s most vulnerable economies. The most common reasons for starting a business were not innovation or opportunity—but survival. Nearly 60% of owners were women, particularly in individual and micro-businesses, while only 14% of MSMEs qualified as “most sophisticated” in terms of record-keeping, formalisation, or strategic growth.
Beyond the headline stats was a quiet entrepreneurial revolution. Most MSME owners had no formal training—78% learned on the job or from family and peers. Despite this, they worked long hours: over 75% worked at least 5 days a week, often from residential premises. Challenges were rife: lack of access to finance (49% struggled to raise start-up capital), limited customer bases, competition, and infrastructural constraints. Yet half of business owners said they were proud of what they had achieved, even as many feared their businesses might not survive long term.
From Informal Hustles to Economic Muscle: Tracking Lesotho’s MSME Transformation
Financial inclusion was low: 35% of MSME owners were completely excluded from both formal and informal financial services. Only 2% accessed loans from banks, and insurance coverage was nearly non-existent. But the businesses endured, adapting informally—through savings clubs, borrowing from friends, or making do with low-cost methods.
In 2023, the FinScope MSME Survey revealed a transformative shift in Lesotho’s entrepreneurial landscape. Compared to 2016, the sector experienced remarkable growth—138,723 MSMEs were identified, employing over 255,000 people, more than doubling the 2016 employment figures. Notably, there was a move away from informal individual entrepreneurship (down from 83% to 71%) toward more structured micro and small enterprises. Formalisation also improved, with 24% of MSMEs registered (up from 18%). Monthly turnover of the sector increased fivefold to M 964 million underscoring the growing economic footprint of MSMEs in Lesotho.
Despite these gains, key challenges persist. While 85% of business owners are financially included, access to formal credit remains limited—with only 7% accessing bank loans. Most MSMEs continue to rely on informal finance or family support. Mobile money usage surged, driving much of the formal financial inclusion, while banking remained largely transactional. Moreover, insurance uptake rose from 2% to 19%, though mostly for personal cover like funeral plans. Barriers like irregular income, low digital adoption, and limited access to basic infrastructure (e.g., electricity) continue to hinder growth. Nevertheless, the resilience and evolution of Lesotho’s MSME sector since 2016 marks a critical step toward inclusive economic development.
Mapping Lesotho’s MSMEs: Our Role in Capturing the Informal Economy
To uncover these insights, our team at AfricaScope in 2016 led a nationally representative survey covering 2,182 MSME owners across all 10 districts of Lesotho. Using satellite imagery and detailed GIS mapping, we identified over 47,000 households and helped map 375 enumeration areas, ensuring even the smallest, most remote enterprises were represented. We trained local fieldworkers, digitised data collection using PDAs, and worked closely with the Lesotho Bureau of Statistics to develop a custom Business Sophistication Measure (BSM) to classify MSMEs beyond simple employee counts or registration status.
The BSM developed by AfricaScope offered a nuanced lens through which to understand the diversity of the country’s MSME sector. Rather than relying solely on traditional indicators like employee count or registration status, the BSM classified businesses into three distinct segments – Least Sophisticated, Emerging, and Most Sophisticated. These segments are based on a combination of characteristics such as formal registration, record keeping, use of financial services, and level of business planning.
The majority of businesses (45%) fell into the Least Sophisticated category, highlighting their informal, survivalist nature, limited structure, and lower levels of education or access to finance. Only 14% of businesses were considered Most Sophisticated, typically located in urban areas, owned by better-educated individuals, and more likely to keep records, register their business, and access formal financial services.
This segmentation revealed more than just business traits—it underscored the developmental gap across Lesotho’s MSME landscape. The BSM allowed policymakers and support agencies to target interventions more precisely, identifying which segments needed foundational support (such as basic training and financial literacy), and which might benefit from growth-focused services like market access and financing solutions. It became clear that elevating the sector would require differentiated approaches tailored to where businesses stood on the sophistication scale—not just one-size-fits-all programs. What the figure shows is that the more sophisticated MSMEs in Lesotho are concentrated in the service and accommodation sectors, while the least sophisticated businesses are predominantly found in agriculture and retail.
Powering Inclusion: How AfricaScope Turns Data into Development
The result? A dataset that not only informed policy but laid the groundwork for tailored support to Lesotho’s MSME sector—support rooted in the reality of informal, grassroots enterprise. This is a consequence of AfricaScope’s unique survey expertise that is rooted in decades of experience in conducting large-scale, multi-country socio-economic and market research across Africa. The company excels in the full survey lifecycle—from sampling design and instrument development to digital data collection, quality control, and advanced analytics. Its teams are skilled in deploying CAPI (Computer-Assisted Personal Interviewing) technologies in challenging environments, ensuring high response rates and data reliability.
AfricaScope also works closely with government agencies, NGOs, and international partners to align research with policy needs, making their outputs not only statistically robust but also highly actionable. Their ability to integrate quantitative surveys with spatial data and qualitative insights provides a comprehensive view of complex development challenges—whether assessing financial inclusion, MSME ecosystems, or access to services. This methodological strength positions AfricaScope as a trusted research partner across the continent.
AfricaScope brings a unique blend of technical precision, local insight, and cutting-edge geospatial methodologies to surveys like the FinScope MSME study—not only in Lesotho but across the African continent. With deep experience in household mapping, satellite-based enumeration, and GIS-integrated field logistics, AfricaScope ensures that even the most remote or informal businesses are accurately captured. What sets the team apart is not only the ability to map and sample populations with scientific rigor, but also the cultural fluency to train local fieldworkers, design context-specific survey tools, and adapt global research frameworks to local realities.
This combination of data science, on-the-ground presence, and development-sector experience enables AfricaScope to deliver high-quality, nationally representative data that informs policy, drives inclusive economic strategies, and gives voice to underserved communities across Africa.
