The government is hatching a plan to turn the Youth Enterprise Development Fund into a Microfinance Institution. Currently, the fund provides loans to existing micro-finance institutions (MFIs), registered non-governmental organizations (NGOs) involved in micro financing, and savings and credit co-operative organizations (SACCOs) for on-lending to youth enterprises.
As reported in one of the dailies this week, university student leaders in the country are appealing to the government to set up a fund that would see jobless graduates get a monthly allowance. According to The Star newspaper, Kenya University Students Union (KUSU) wants the government to pay jobless diploma and degree graduates KES 5,000 and KES 10,000 respectively every month.
Youth Fund Failure
When the above discussion was raised on on twitter by Pesatalk, it stirred up mixed reactions from the public most of which pointed towards the already existing Youth Enterprise Development Fund. But how successful has the fund been since its inception?
Susan Kariuki, the chief executive officer of the Youth Agenda says that given the low growth of employment in the formal sector, the growth of micro- enterprise provides the best opportunity for youth livelihood. Investments made for youth development in Kenya have been enormous by both state and non-state actors. She says this is the purpose the fund was created in the first place.
Kariuki says the Youth Enterprise Development Fund which was meant to enhance youth participation in socio-economic development through the provision of credit to enable young entrepreneurs to access finances to set up or expand businesses appears to be failing in this mandate.
The fund has been dogged by technical, structural and governance challenges since inception and young people do not seem to be benefitting from it as banks and financial intermediaries exploit the low interests to lend to their own clients. The procedures and interest charged for accessing the youth fund remain the two biggest hurdles to youth enterprise development in Kenya.
Microfinance Youth Agenda recommends that to mitigate the challenges youth face in accessing loans , the fund should be turned into a micro finance institution. This, Kariuki says will ensure transparent flow of capital to young people for informal enterprises at the lowest interest possible. Beyond minimizing hurdles and providing the lowest interest options, a micro-finance structure will improve efficiency and effectiveness of the fund ultimately ensuring impact for individual vulnerable youth across the country.
Former Director of The Youth Enterprise Development Fund Dr. Edward Mungai told Pesatalk that plans to convert the fund into a Microfinance institution have been underway for sometime. He however declined to comment on new developments since he does not serve on the board any more.