This report is a review of theLesotho's financial system covering: i) themacro-financial environment; ii) safety and soundness of thebanking system; iii) non-bank financial institutions; andiv) microfinance and finance for small and mediumenterprises. The report was based on data and otherinformation collected during the March 2003 mission. Thereport is presented in four chapters: chapter one:macro-financial environment and structure of the financialsystem; chapter two: addresses key issues facing the bankinginstitutions; chapter three: addresses the non-bankfinancial institutions; and chapter four: addresses thefinance for micro, small and medium enterprises. Astatistical annex contains relevant data for all thechapters. Overall, the review had three major objectives: a)to assess the safety and soundness of selected sectors inthe financial system; b) to evaluate major constraintsfacing the financial system and its ability to supportprivate sector development; and c) to formulate actions andpolicies to address these constraints.