Kenya Youth Enterprise Fund: Show us the money - "tusiharibu wakati bure!"

Yesterday the youth fund management and leading banks were at State House launching their three year strategic plan and signing partnership agreements. This event has been covered in the media, however the story on the nation online carries a very interesting comment. A reader called “ronns” posts: “hey, is this for real? if anyone has received this funding please let us know tusiharibu wakati bure”.

And ronn’s comments belies the real controversy over the effectiveness of the youth (as well as the women’s enterprise) development funds. How many people have actually received this funding?

This is not the first time this issue is being raised. In an earlier blog, we actually wrote about the failings of both funds, in that they were not equipped to reach as many Kenyan youth and women entrepreneurs as possible. The blog “Youth Fund: It is not enough just to open the gates of opportunity” posted in October this year decried the fact that it seems that there is so much money available (yesterday the youth fund received another injection of Kshs. 1.75 billion shillings ($22 million) from the government) but the means of accessing it remain remote. So it is not surprising that people such as ronn are asking the fund managers to show them the money. It’s no use getting our hopes up and wasting valuable time.

Youth entrepreneurs have already managed to fight the odds. Still engaging in enterprise despite facing multitudes of negative stereotypical and patronising attitudes as well as a perceived lack of credibility, particularly from formal finance institutions. These young innovators have without recourse to bank loans managed to grow businesses on bootstraps. Relying on their wits and sheer fortitude, they have become adept at sharing and sub-letting even the smallest amounts of space, using innovative and cheap marketing techniques, outsourcing work for which they don’t have specific technical expertise, amongst other resourceful means of operating their businesses.

Of course they would appreciate the chance to borrow money to startup new ventures as well as expand existing ones; but the model of the youth fund distribution also acts as a deterrent to their accessing finance.

Firstly the number of intermediaries particularly in rural areas are few, though it was commendable to hear that First Community Bank has at least taken up the mantle to ensure that as many youth in Northern Kenya can get access to the youth fund.

However, the second issue that we have previously posed was that banks as intermediaries for the fund act as a disincentive. For youth entrepreneurs who may have previously been denied credit by these same institutions, there is a marked hesitancy to approach these banks again, despite the ongoing advertising campaign by the Ministry of Youth Affairs. Being denied a loan for your business is preety much on the same scale as being denied a visa to the US or Europe. An entrepreneur who has tied up all their own resources and financial future in their enterprise takes it as an affront to their business vision, and hence themselves. Trying to convince that same entrepreneur to go to a bank to access the youth funds is a bit like pulling teeth without forceps.

Thirdly, even if you can get the young entrepreneur to go to the bank to apply for the funds, they will find a banking culture that is based on assessing whether the loan can be repaid, not on the actual viability of the startup. As we wrote in our previous post, without any culture change in the banking fraternity, you can still expect the loan officer in the bank to be more focussed on when the youth entrepreneur will pay back the loan rather than on the business profitability.

Finally we suggest that the youth enterprise fund should place more emphasis on its social impact rather than the number of loan beneficiaries. Yes, it is good to hear that loan repayments are in the 90% range. However, what has been the actual impact of growth on the 55,000 funded youth enterprises, the livelihoods of the youth who received the loans and the wider community?

For instance regarding the over 200,000 new jobs which the youth fund say have been established over the last two years: What proportion of these are the founding entrepreneurs and specifically how many people have been employed to work in these ventures? If there is to have been a significant impact on society, how much money in salaries and wages do the employees in these youth owned ventures earn?

The first two can be measured almost immediately by the youth fund whilst we do agree the wider societal impact would take longer. However, these indicators are what will truly measure the success of the enterprise fund rather than how many youth groups repaid their loans.

During yesterday’s event, President Kibaki also said that the youth had proven that they could “be trusted with any amount of money”. Isn’t it time that the youth fund starts lending money to individual entrepreneurs rather than groups?

The Youth Fund’s three-year strategic plan seeks to boost the Fund to Sh7.2 billion by 2011. As it is youth entrepreneurs are busy enough, most being the sole operators of their businesses. They lose money when they have to close shop to go seeking these funds, only to come face to face with a system riddled with obstacles and negative attitudes towards youth business. So please Youth Enterprise Fund managers don’t waste their time, in ronn’s words, tusiharibu wakati bure!