Bashing without researching the Kenya Youth Enterprise Development Fund

This morning, we received a comment from an anonymous reader on a post Kenya Youth Enterprise Fund: Show us the money - "tusiharibu wakati bure!"

“Anonymous said...
This idea of bashing things without reearching should just stop. Why do we bash the youth fund even without endeavouring to find out how it works? Do we expect the fund to put labels on the foreheads of those it loans money?

Let us take time to study processes. Of course it is much easier to criticise.”

Here is our response to Anonymous:

Anonymous,

These are the researched FACTS regarding the youth fund:

1. The process of accessing the fund remains an obstacle to youth entrepreneurs. Forcing the youth to form “groups” in order to access Kshs. 50,000 is not in tune with the times. Many youth entrepreneurs are sole-proprietors and compelling them to dilute their shareholding in their enterprise is simply unfair.

2. For those individual entrepreneurs who can access upto 5 million shillings from financial institutions, they too are faced with a credit worthy assessment system that does not take into account the innovativeness of young enterprises. When they approach these banks they continue to face the same stereotypical and patronising attitudes as well as a perceived lack of credibility from the loan officers. Furthermore, they are also supposed to have bank accounts of at least six months standing.

3. The youth fund in its current form does not go far enough in building the capacity of young entrepreneurs to make their businesses growth oriented and market competitive. The fund should apart from holding short workshops for prospective loan recipients, conduct a nationwide programme of ensuring that young businesses can operate effectively and prosper. They could even go further by insisting that government procurement processes take into account youth enterprises for small tenders.

4. Research has proven that small business owners have a natural aversion to exposing their business to risk via debt financing. This has also had an adverse impact on the number of youth accessing the fund. The Youth Fund has done nothing to work on changing this state of affairs. For those interested in these studies, we shall happily provide citations.

5. Finally, just the process at the constituency level for accessing the fund is untenable, particularly in urban areas. The process of registration of groups is riddled with bureaucratic barriers. Secondly the number of banked youth is small in a country where 10 million Kenyans remain un-banked. The M-Pesa system has become a popular money transfer and financial management system solely because it uses mobile phones that reduce the time it takes in normal banking and money transfer processes, something that is attractive for young entrepreneurs who are time constrained. Third, the process of getting an ID card is similar to the group registration process. The Provincial Administration, specifically the local area chiefs, need to facilitate and support youth to acquire such documentation. Fourth in urban areas, getting to know who apart from meeting the local youth officer, Social Development Assistant or the Secretary of the Locational Social Development Committee is a tedious process. Imagine the sole-proprietor who has to close their kiosk every time they go looking for these officials, and probably has to queue for a long time waiting to meet them or even doesn’t manage to meet them. The opportunity cost is too high for such a small business who lose revenues they could have acquired in this time.

Now since we have been accused of criticising without merit, Anonymous, if you had really read this as well as other posts (http://yipeorg.blogspot.com/2008/11/opening-public-procurement-door-to.html and http://yipeorg.blogspot.com/2008/10/youth-and-women-enterprise-development.html) you would know that we have in the past suggested several reforms for the youth fund process:

1. Respecting individual youth entrepreneurs and their efforts so they do not have to form “groups” just to get the loans.
2. Ensure the financial institutions recognise the innovativeness of young enterprise in their loan application assessment process.
3. Build youth capacity to create and manage business by undertaking free training workshops that also take into account the time constraints of youth entrepreneurs. Also ensuring a level playing field for young enterprises as compared with other enterprises in the same industry.
4. Make the loan products attractive to young entrepreneurs, maybe by diversifying into short-term equity based financing.
5. Finally facilitate the process of accessing the fund by removing the need for so many stamps and signatures required.

If you still feel that this is “bashing without researching” then there’s really nothing else that can be said.

Youth Interactive Portal for Enterprise (Yipe.org)