• PS says youths can provide household items for loans less than Sh500,000, for more a logbook or title deed is required
• Says it will make them appreciate the money and invest wisely
The government will not scrap the requirement for collateral for affirmative cash advanced to women, youths and people with disability.
Youth PS Francis Owino said those applying for the cash must ‘sweat’ to appreciate the need to invest the money in profitable ventures and repay the loan.
“We cannot just be dishing money to people with no repayment plans. For the youths to put the money into good use and repay, they must sweat to get it,” Owino said.
The PS spoke during the launch of a self-evaluation report on the performance of the outgoing board of the Youth Enterprise Development Fund in Nairobi on Monday.
Concerns have been raised over the need for collateral for the affirmative funds, with critics arguing the requirement locks out thousands of youths from accessing the fund to start and grow their businesses.
“It is blocking (the youths) yes, but if you give free cash to anybody, the money will be consumed because most of the beneficiaries will not have business ideas. They do not have any vision,” he said.
Outgoing YEDF chairman Ronnie Osumba said scrapping collateral is in the interest of the affirmative funds, but said it is not tenable because public money is involved.
He said the ongoing efforts at the National Treasury to establish a Credit Guarantee Scheme is the only way to ensure the loans advanced to the youths are secure.
“We will have a third party who is willing to underwrite the loans to young people and with that de-risk any loss which then leads to the need to remove the collateral,” Osumba said.
But the PS said the scheme will not be sustainable as repayment rates of loans advanced to youths are below 50 per cent.
“For the Uwezo Fund, for example, the repayment is below 40 per cent. But if the same youths go to the bank, they repay because they know the money is hard-earned,” he said.
However, according to the YEDF report, loan repayment rate has improved to 88 per cent this year from 58 per cent in 2016.
“The fund recorded the highest ever repayment or recovery in the 2017-18 of Sh509 million, which was an improvement of 18 per cent from 2016-17,” Osumba, whose three-year term ends at the end of the month, said.
For YEDF loans, applicants are required to provide household items as collateral for loans less than Sh500,000. Those seeking more than Sh500,000 must provide logbook or title deed for the loan.
Osumba said property provided as collateral needs not be in the name of the youth applying for the loan.
"It can be in the parent, friend, brother or any other who will agree to guarantee the loan for the young person," he said.
In 2017-18, Sh549 million was disbursed to 109,840 youths, representing a 57 per cent improvement in the uptake of the loan compared to 2016-17.
Cumulatively, the fund has disbursed loans amounting to Sh12.8 billion to 1,159,393 youth across the country since 2013.
“Out of this, Sh7.8 billion has been advanced through on-lending and leverage agreements with financial intermediaries while Sh4.97 billion has been disbursed directly."
(Edited by R.Wamochie)