A World Bank-backed programme is showing that grants alone are not enough; finance, mentoring and operating discipline are what move small firms toward investability.
Lesotho’s entrepreneurship challenge is often described as a shortage of finance. The latest results from the Lesotho Competitiveness and Financial Inclusion Project suggest that the harder problem is more specific: small firms need a combination of finance, mentoring, operating discipline and market access before capital can be used productively. The World Bank says the programme has supported 464 small and medium-sized enterprises, enabled access to about $2.5 million in finance and contributed to the creation of 2,100 jobs. Those figures matter because they show what happens when enterprise support is treated as a system rather than as a grant-disbursement exercise.
The project, known as CAFI, was designed to increase access to business support services and financial products for micro, small and medium-sized enterprises, with particular emphasis on women- and youth-owned firms. Its entrepreneurship hub combines training, mentoring, incubation and early-stage financing. The World Bank reports that 52% of supported SMEs are women-led and 46% are youth-led. That matters in a labour market where formal employment opportunities are limited and where business formation often becomes an alternative route into income generation.
The mechanism is visible in the businesses profiled by the programme. Pay Lesotho, founded by Lerato Masupha, built a digital-payments platform that integrates mobile money, cards, QR codes and online payment gateways. Masupha told the World Bank that the company now serves more than 300 merchants and processes over M20 million in transactions every month. The importance of that example is not the technology alone. It shows how business support can help a founder convert a functioning idea into an operating company that has measurable customers, recurring transactions and a clearer case for future finance.
The same pattern appears in manufacturing. Gifted Hands, co-founded by Thato Tsoeute, entered the programme with demand for its products but with liquidity and capacity constraints that prevented it from fulfilling orders efficiently. The intervention focused on business systems and the use of grant funding to clear backlogs, procure stock and purchase equipment. According to the World Bank feature, the company subsequently increased cash flow by 30%. That is a practical illustration of why finance is most powerful when it is attached to an operating problem that has already been diagnosed.
A third example is JuliGerm, founded by Qoane Mothibeli, which uses artificial intelligence, satellite observation, remote sensing and spatial analytics to support agricultural decisions. The company moved from an idea-stage business into field execution, including work profiling hundreds of farmers and mapping agricultural land for risk and insurance purposes. The transition is important because many African start-ups remain trapped between prototype and commercial deployment. Incubation has value when it helps the entrepreneur cross that gap and build evidence that customers, banks and investors can evaluate.
The broader lesson is that investability is created before an investor arrives. A small company becomes more financeable when it can demonstrate reliable records, repeat customers, pricing discipline, cost control, contracts, governance and a clear use for capital. Programmes that simply distribute money without improving those fundamentals may increase spending without increasing business resilience. CAFI’s design recognises that an enterprise needs both capability and capital.
The structure also helps explain why modest grants can have an effect larger than their nominal size. Many firms in early stages do not need millions of dollars. They need enough capital to remove one binding constraint: a machine that increases throughput, inventory that allows a contract to be fulfilled, software that automates billing, or marketing that reaches a new customer segment. When mentoring helps identify the constraint, grant or loan capital can be targeted more precisely.
For Lesotho, this approach also has macroeconomic relevance. The country needs private-sector growth that is not dependent on a small number of large employers or on public-sector hiring. Stronger MSMEs can broaden the tax base, create jobs closer to communities and deepen local supply chains. The World Bank’s original project design also emphasises resilience, financial inclusion and the adoption of digital technology, all of which improve the ability of firms to survive shocks.
The remaining test is scale and durability. Supporting hundreds of firms is meaningful, but Lesotho’s enterprise base is much larger. The quality of the model will ultimately be judged by how many supported companies survive beyond the programme, increase revenue, hire workers without subsidy and become capable of attracting commercial finance on normal terms. Incubation should therefore be measured not only by participation but by graduation.
There is also an institutional lesson in the way the programme works with enterprise-support organisations. Instead of expecting one central agency to coach every founder directly, CAFI builds a layer of local intermediaries that can provide mentoring and track progress over the incubation period. That approach matters for scale. A national entrepreneurship system becomes more durable when capability exists in several support organisations rather than in one donor-funded project office. Over time, the strongest measure of success will be whether those organisations can continue to help firms improve financial records, pricing, governance and market access after external project funding declines.
Lesotho’s experience is useful because it reframes entrepreneurship support. The objective is not to create a permanent class of grant-dependent businesses. It is to help firms become investable enough that grants are no longer necessary. When finance, mentoring and business systems are combined, enterprise development becomes less about celebrating start-ups and more about building companies that can stand on their own balance sheets.
