Theory, Practice and DFI Institutional Design: Case of the Lesotho National Development Corporation

Abstract

The one important aspect of the development financing institution (DFI) to serve its development mandate lies inevitably in its institutional design. In Lesotho, the Lesotho National Development Corporation (LNDC) is marked as the DFI that is instituted to give developmental policy direction in the manufacturing sector. Although the LNDC, constitutionally, is mandated to develop the manufacturing sector, there’s a need for a private sector-led economy that is particularly driven by large-scale enterprises that also require a strenuous industrial update and adequate infrastructure. Despite the importance of private sector development, the LNDC mandate does not cover the financing of large-scale enterprises. This paper, therefore, examines the LNDC’s institutional design and its financial structure, which embodies various financial institutional arrangements to meet industrial upgrade. The conclusion lies in the question of whether the Basotho Enterprise Development Corporation (BEDCO) and LNDC should be merged or whether one should be dissolved, and its operations are assigned to the existing DFI.