Why youth funds are yet to address lack of jobs

The government’s efforts to address youth unemployment through dedicated funding have yet to bear fruits, new data shows.

A research by the Kenya National Bureau of Statistics (KNBS) reveal how little the state kitties such as the Youth Fund have done to promote entrepreneurship among the youth.

KNBS says in a newly-released report that 80.6 per cent of the youth use family or own funds as start-up capital while 4.2 per cent of business owners get loans from family or friends.

The survey, which polled 50,000 Micro, Small and Medium Enterprises (MSMEs), found that banks finance only 5.6 per cent of MSMEs, while investment groups or chamas account for 1.4 per cent of the financing for small businesses.

Co-operative societies, which offer lower interest rates than banks, accounted for an even smaller portion of the start-up financing at 0.4 per cent, while government funding accounts for a paltry 0.1 per cent.

“The report shows there is very little financial access for the MSMEs,” said Micro and Small Enterprises Authority (MSEA) chief executive officer Patrick Mwangi during the report’s launch.

A separate research by PARS, a Kenyan private research consultancy company, shows that 81 per cent of Kenyan youth have never used the Youth Fund.

The research says 51 per cent of the youth do not know about the Fund or procedures for accessing the money, while 15 per cent noted that the application process is tedious and long.

Nine per cent of the youth polled viewed the fund as corrupt with a further 10 per cent saying the capital given by the Fund is too little.

They also cited fear of getting into difficulties in repayments, describing the whole process as “expensive and marked by stiff competition from many other groups applying for the same funds.”

“Government funds, including Uwezo and Youth Fund, have negligible impact at one per cent as a source of funding to MSMEs. The financing schemes are not working or having the desired impact and should therefore be restructured,” said Mr Ndiritu Muriithi, former assistant minister and chief economist at Metropol Corporation.

The Youth Enterprise Development Fund (YEDF) launched in 2007 and fashioned as a strategy of “gainfully engaging our youth, majority of whom are unemployed” is yet to bear significant fruits according to the report.

An estimated 55 per cent of East Africa’s youth aged between 18 and 35 are said to be unemployed, according to a survey by the East African Institute of the Aga Khan University. About 50 per cent of youth graduating from East Africa’s universities cannot find work, says the survey.

Critics say State kitties should be disbanded as they have allegedly been hijacked by graft cartels and are not effective in lifting the youth out of poverty.

Central Organisations for Trade Union (COTU) Secretary General Francis Atwoli said the two kitties have failed to address youth unemployment and uplift the fortunes of women and people with disability.

Mr Atwoli said the funds have become conduits through which money from the National Treasury is siphoned.

The Youth Fund has in the past disbursed funds through financial intermediaries primarily banks which are deemed by majority of the youth as unfriendly.

Under Access to Government Procurement Opportunities (AGPO), 30 per cent of government tenders should, as directed by President Uhuru Kenyatta in 2013, go to three special interest groups including women, youth and the disabled.

The Youth Fund has disbursed loans worth Sh11.7 billion to 886,313 youth across the country to date.