Borrowing in retirement from Basotho lenders
In Lesotho, a retiree can borrow mainly if they receive a regular pension from a retirement fund, such as the one for public officers, with repayment deducted from the pension, while the universal old age pension paid from age 70 rarely supports a loan.
Two types of income for older Basotho
Retirees in Lesotho live on an occupational pension paid by a state or company fund, on the non-contributory old age pension, or on family support. Only the first provides enough income to interest most lenders.
The old age pension paid from 70
Since 2004, Lesotho has paid a universal old age pension to citizens aged 70 and over. Its modest monthly amount in maloti goes mostly on food and care, and serious lenders do not treat it as a basis for credit.
The public officers' pension fund
Former civil servants receive a pension from the Public Officers' Defined Contribution Pension Fund or from the old state pension scheme. This regular income, paid into a bank account, makes it possible to obtain credit with deduction directly from the pension.
Former miners and their rights in South Africa
Many Basotho worked in South African mines. Some receive benefits from South African retirement funds, sometimes claimed years later. This income can be taken into account if it is paid regularly into an account in Lesotho.
The age limit set by lenders
Banks and microfinance lenders often set a maximum age at the end of the repayment period, beyond which credit life cover is no longer available. A 65-year-old retiree will therefore usually get a shorter term than a 40-year-old employee.
Pension-backed loans with direct deduction
As with employees, deducting repayments straight from the pension reduces the lender's risk. Still, check how much of the pension remains after the instalment, because health costs often rise with age.
Credit life insurance and the estate
Credit life cover, taken out with insurers such as Lesotho National Life Assurance or Metropolitan Lesotho, repays the balance if the borrower dies. Without it, the debt can be claimed from the estate, which weighs on heirs and the extended family.
Finishing the family home after a career
Many Basotho retirees use their lump sum or a loan to finish or renovate the family house. The lease and mortgage requirements involved are described on the page about home loans in Lesotho.
The retirement lump sum as an alternative to borrowing
Depending on the scheme, part of the benefits can be taken as a lump sum on retirement. Using that capital to clear existing debts often avoids taking on an expensive new loan just after leaving work.
Scams aimed at retirees
Older people are targeted by fake agents promising faster payment of a mining pension, by bogus lenders and by calls asking for card PINs. No official body charges a fee to release a pension.
An overview of credit options
To compare pension-backed credit with offers from banks, microfinance lenders and the Boliba savings and credit cooperative, the overview of borrowing in Lesotho presents all licensed lenders and the general rules they follow.
Retirees in Botswana as a regional benchmark
In Botswana, the old age pension starts earlier and the public retirement system works differently. The page on loans for retirees in Botswana lets you compare borrowing conditions for older people in this neighbouring country.
Getting a pension-backed loan in Lesotho
- Work out the net monthly pension left after existing deductions and health expenses.
- Apply at the bank where the pension is paid, or at a microfinance lender licensed by the central bank.
- Provide your pension statement, ID card and recent account statements.
- Check the maximum age at the end of the loan and whether credit life cover is available.
- Sign the contract and make sure the deduction appears correctly on your pension statement.
Costs of a pension loan in maloti
| Item | Benchmark | What makes it vary |
|---|---|---|
| Interest rate | Above the 10.75% prime rate, indicative | Lender, term and size of pension |
| Credit life cover | Premium rises with age | Age, amount and term |
| Initiation fee | Lender tariff | Amount borrowed |
| Pension deduction charge | Depends on the fund or bank | Collection method |
Documents retirees in Lesotho are asked for
- Lesotho national identity card
- Recent pension certificate or payslip
- Statements for the account receiving the pension
- Proof of address
- Pension deduction authorisation form
Risks for retired borrowers in Lesotho
- Committing a large share of the pension for several years without allowing for rising health costs.
- Signing a loan without death cover, leaving the whole remaining debt to the heirs and extended family.
- Paying so-called fees to speed up payment of a miner's pension from South Africa.
- Borrowing on behalf of a relative who promises to repay, then bearing the pension deductions alone.
Lenders to contact
- Nedbank Lesotho: Lesotho subsidiary of the Nedbank group providing retail banking services to individuals, including borrowing and credit solutions.
- Nedbank Lesotho: Lesotho subsidiary of the Nedbank group offering personal loans as well as home loans to individual customers.
- Letshego Lesotho: Lesotho subsidiary of the Letshego inclusive financial services group, specialising in loans to individuals, including loan consolidation.
Questions about credit for retirees in Lesotho
Can the old age pension be used to borrow in Lesotho?
The universal old age pension paid from age 70 is modest and intended for basic needs. Licensed lenders rarely accept it as repayment income, and pledging it to informal lenders is strongly discouraged.
Up to what age can you borrow in Lesotho?
There is no single rule: each bank or microfinance lender sets a maximum age at the end of the loan, often tied to the terms of credit life cover. The older the borrower, the shorter the term offered.
Can a former civil servant get a loan repaid from the pension?
Yes, civil service pensions are paid regularly and often allow direct deduction. The lender checks the net pension amount, the deductions already in place and the credit bureau report before approving.
What happens to a Basotho pension loan when the borrower dies?
If credit life cover was taken out, it repays the outstanding balance. Otherwise, the lender can claim the debt from the estate, which may force the family to sell assets or negotiate a repayment plan.