A Political Kenya: Latest Politics and Kenya Economy News

The KShs 1 billion youth development kitty is set for disbursement starting this Thursday. The fund will be launched by President Kibaki three days after revealing to African Heads Summit meeting in Addis Ababa, Ethiopia that the fund will be doubled to 2 Billion Kenya shillings in the next year.

Unlike any other political funds set for the youth, the funds will be distributed through banks and other financial intermediaries. The fund first half will be divided equally across all districts. The other half will be sent to districts pro rata to district population. Half of the fund will be disbursed through the youth enterprise scheme social development committees based at constituency level. The rest will be disbursed via financial intermediaries like banks and micro finance institutions.

The fund is open to youth aged between ages 20 and 35 years of age and with a viable business plan. The fund is not a handout but a loan scheme by the government targeting the youth. It is expected that the loanees will repay the loan at a lower interest rate to be announced but expected to be between 8 and 12%, lower than the best bank rate of 14%. It will solve the problem of unemployment and hurdles facing enterprising youth in need of credit facilities but lack collateral or consistent income.

The youth fund is expected to tackle the unemployment crisis facing a majority of Kenyan youth and encourage business start-ups, youth investments and boost the juakali sector. Financial intermediaries are expected to be creative and develop other collateral criteria to safeguard repayment of the loans other than the traditional asset and payslip related collateral.

Financial institutions are heavily competing for the disbursement of the loans with some offering to boost the kitty by 800m if given the disbursement function.

This will be another political boost to the Kibaki administration especially if equitable and easy access to the fund is guaranteed and exercised. It will give him a head start in his economic manifesto just like the CDF kitty. It may cost him a lot if the corruption and embezzlement bug hit this fund.

It has also been argued the 1Bn kitty is a drop in the ocean in tackling youth unemployment and poverty. However, the announcement that the fund will be doubled in the next financial year is a step in the right direction. Other political costs are that the fund is actually a loan at relatively competitive rates backed by a viable business plan to be repaid and not free aid to the youth. Disbursement logistics has also taken long to finalize and it may even take longer for the fund to reach the grassroots.

Involvement of financial intermediaries could be a bottleneck especially in applying, vetting of business plans, viability appraisals, apportioning the fund to applicants and assessing their credibility processes. This will be a tedious process if banks follow their normal loan routines. The banks will also be cautious lenders since the mantle of debt collection vests with them.

A huge proportion of youth do not operate bank accounts, their credit worthiness has scared off financial institutions from dealing with them and the informal sector do not have streamlined operational regulations that would make the vetting process easier. Unless the banks are willing to close one eye and amend their loan rules, it may be a while before the youth get real help in their economic quagmire. Kibaki being a conservative economist, he may not be in touch with the real needs of the youth but he is trying in a not so small way.