Time to reform Youth Enterprise Development Fund


Over 70 percent of the unemployed in Kenya are youths. The situation is complicated by Kenya’s age structure, with 32pc of the population being between 18 and 35 years. The median age is 18.8 years, meaning Kenya is truly a young country. It also means that the country has a high dependency ratio.

This also means college graduates are taking longer to get jobs. They are postponing the starting of their lives awaiting a job. Ordinarily obtaining a job marks the beginning of settling down to a life of independence. A young person who takes a long time to find a job is also likely to stay with parents longer, leading to frustration. An extended wait also creates opportunities for youth to engage in deviant behaviour.

It is apparent, therefore, that creating job opportunities for the youth is an enormous task that requires concerted efforts by both the public and private sectors. We also need to put in place policies that will enhance job creation especially through enterprise development.

One of the initiatives the government has in place to encourage the youth to get into self employment is the Youth Enterprise Development Fund whose launch was received with a lot of optimism by the youth. It cannot be denied that the fund has recorded tremendous success in awakening entrepreneurship among the youth. But it has also encountered challenges.

In order to empower the Youth Fund to play a bigger role in empowering young entrepreneurs and therefore creating employment, the government will need to deal with challenges that limit its effectiveness. Indeed, the Kenyatta administration has promised to promote employment, with the Youth Fund playing a cardinal role.

One of the greatest challenges the fund has faced is the perception that it was a political gimmick. The greatest critics of the Fund had very unkind word, of course mainly for political mileage.

The wing of the coalition government that was in charge of the fund for five years was in fact its greatest critic. No wonder loan uptake reports from the fund had for long shown a disparity trend that reflects Kenya’s political fault lines.

The fund must have grassroots structures that are visible and close to wananchi to enhance its acceptability as a genuine and viable initiative. It must also invest more resources in public education.

The legal order that established the fund states clearly how the board should be appointed. This order has in the past been ignored, leading to a board made up of political appointees who lack the requisite skills and experience to shepherd the fund. The fund has occupied acres of media space, all for the wrong reasons, ranging from allegations of misappropriation to leadership wrangles. This is a pointer to lack of focus on what their mandate is. Political appointees will tend to play politics, ignore concerns of the primary client and engage in selfish pursuits. Let the board of the fund be reconstituted to inject professionalism.

The fund must address itself to its capacity to deliver services. To date the fund has disbursed about Sh7 billion to youth-owned enterprises. Of this, only Sh1 billion has been lent directly. A whopping Sh6 billion (or 85.7pc) has been loaned through financial intermediaries (read banks).

This calls to question the fund’s capacity to serve the youth without using banks. It also means that 85.7pc has been loaned to youths who would ordinarily be able to obtain a loan from a bank (and meet its conditions).

What then has happened to the majority of the youth who find banks unfriendly? They have only borrowed Sh1 billion, mainly as groups, over a period of six years. Methinks they have been short-changed.

Interestingly, despite reduced funding by the Treasury over the years, the fund has always had more money than it can lend. At no time have the youth been turned away because there was no money.

The fund’s capacity, or lack of it, must be addressed urgently. The government can strengthen the fund by revising the laws governing it and empowering it to employ more extension officers and other staff.

The government could also revise the broad mandates of the fund to ensure it specialises in financing, entrepreneurship training and market support.

The other mandate that the fund must now abandon is that of providing worksites and trading premises, which it refers to as commercial infrastructure. This should be left to Kenya Industrial Estates or to county governments. The fund should limit its involvement in this area, and focus on leveraging on what others are doing.

In the medium term the fund needs to change its model to be friendlier to the youth. A micro-finance model will enable the fund be more relevant and accessible to the youth. My proposal is that of a deposit taking youth micro-finance institution. Not only will it enable youth to accumulate savings, it will also design products that are convenient and attractive to the youth.

We should, therefore, see more “unbankable” youth benefitting from the kitty. This deposit taking MFI could then graduate into a youth bank that will provide loans and guarantees to young entrepreneurs, in addition to trade finance.

The fund should also restructure its loan products to ensure they are not too traditional, and that they cater for sectors that our youth are increasingly taking interest in, including arts, music and ICT. The products must be well researched and youth involved in developing them. It must also be able to meet the needs of youth with big ideas such as buying franchises.

Finally the fund must embrace partnerships. It cannot do everything from scratch. It must leverage on the efforts of other government and private sector agencies. That way the fund will realise more from less.

A vibrant youth fund will help create employment and give youth confidence and hope. A hopeful population is an optimistic and positive population. It is easier to engage because it sees opportunity.

(The writer is the TNA Director of Communications. Twitter: @MachelWaikenda)

7 Replies to “Time to reform Youth Enterprise Development Fund”

      1. @facebook-1368796029:disqus , i agree! this Just banter at its best. That the writer struggles to find earth shaking innovation in how the Govt empowers the youth is evident. Close to 10yrs after the fund came in place, its just the fund itself that is the innovation.Waikenda, innovative ideas on how the fund could respond to the needs of the youth have been put forward before. The problem is not a dearth of ideas, its the politicization of working and staffing of the fund in its core functions.

  1. This is a great article. Was looking at the YEDF just recently and was really discouraged by its format. In regards to direct lending they require that you have a tangible asset as security. This is the primary stumbling block for the expansion of youthful enterprises. Where do we find these securities? I feel as though the government through YEDF would better serve us if they evaluated businesses more like an investor would rather than as lenders. As a young entrepreneur I can only imagine how much easier things would be if I had easier access to financing for expansion…but siombi Serekali, make it or make it…

  2. What you say is true Mr. Waikenda.

    The fund has potential to disburse loans to a variety of youth. But what of the impact? Can that be assessed so far? I do believe that there too much concentration on “Access to credit” without requisite financial literacy endeavours. Even with a deposit taking MFI, without financial literacy, the loans may not provide the upward mobility they would otherwise provide especially for the target market you speak of.

    In addition, there are the regulatory costs involved with setting up a DTMFI and certain financial ratios requirements to be met at any given time. This is just one of the other costs I can think of at this moment so my question is: Is going the DTMFI route effective?

  3. I’m a Muslim and I don’t give nor take interest. I got a small cybercafe business running, and I need more capital to improve it. Can this fund be allocated interest-free? Or is there a way the initiative can help with the purchase of equipment to be paid back over time?

  4. Hi Waikenda,your cannot be far from the truth although you fell short of discussing the consequences of letting youth unemployment go on unabetted.Nowadays its painful to watch news and see us young people loosing ourselves and something urgent and big needs to be done to save our generation without caring political divide.People who want to take credit can do that later but for now we need patriots who will work sacrificially to empower the youth in all areas of life.Being A TNA official means that you can be heard much more and easily and I pray that you will too lobby for the empowering of the youth in a big way.We youth once empowered we can pay taxes that will drive this economy forward much faster than what increasing of VAT would have done.

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