Displaying items by tag: financial stability

FINANCIAL INTERMEDIATION is the role that is traditionally dominated by the banking sector, with little or no space for the non-banks financial institutions. However, this is not the case in developing countries, either due to topology or relative development of the financial system. The purpose of this study is to evaluate the role and impact of the non-bank financial intermediaries in discharging their roles in Lesotho. These institutions have penetrated the country into the rural mountainous areas, and they offer healthy financial system by invoking competition with the banking sector, while also attending to the gap that is left unattended by the former. As a result, Lesotho ranks high on financial inclusion given that majority of services are offered by the informal and auxiliary establishments in the financial sector. However, the authorities have to consolidate on prudential supervision in order to minimise risk that may result from the aggressive offering from the NBFIs in all its various formations.

EXCESSIVE ASSET price volatility, especially in real estate markets, has been associated with financial crises. The purpose of this study is to propose a house price index methodology that will be suitable in the case of Lesotho. The study explored several property indices and establishes that the proper methodology that can be adopted in Lesotho is the classified median price index. Data unavailability in Lesotho excluded other house price index methodologies identified in the literature. Therefore, the study recommends that the Central Bank of Lesotho should adopt the median price index methodology in its attempt to develop a house price index for Lesotho. This recommendation leverages on the following advantages of the median price index. First, this methodology reports the average or median price of houses sold in each time period and does not require characteristics on the house sold. Second, it is easy to compute and third, it uses readily available data from mortgage loans provided by the banking sector