Sh10bn loan sinking Youth and Women empowerment funds

Auditor General Nancy Gathungu has in the dossier warned that billions of shillings in loans extended to youth and women groups for business boosts and startups are unlikely ever to be recovered.

It paints a picture of how the Women Enterprise Fund, Youth Enterprise Development Fund and Uwezo Fund may have failed to deliver the desired goal.

The review for the year ended June 30, 2025, cites non-performing loans, duplicate disbursements, missing borrower records and loans given to groups that never existed.

Collectively, these funds hold about Sh10 billion in loans that are doubtful or unrecoverable, casting a spotlight on whether taxpayers have obtained value for money in the supposed revolving funds.

This comes hot on the heels of a similar situation at the Hustler Fund, where about Sh15 billion is feared to go down the drain, with 19 million borrowers in default.

Gathungu has cast doubt that Sh4.1 billion in Uwezo Fund, which targets women, youth and persons with disabilities, would ever be recovered.

She reported that the loans in question have not been serviced for over three years.

“The recoverability, accuracy and completeness of the outstanding loans could not be confirmed,” the auditor general said.

The audit says the fund is technically insolvent, with the financial statements showing a deficit of Sh47 million for the year under review.

“The fund will remain a going concern for at least the next 12 months…strategies need to be in place to avert such occurrences in the future.”

The auditor has also red-flagged bank statements showing receipts of Sh127 million dating back to 2018 that are not recorded in the cash books.

No official receipts were issued, and the loan accounts of the groups that actually paid were never adjusted.

Women Enterprise Fund on its part, has Sh2.5 billion whose recovery was in doubt at the time of the review.

Of the amount, constituency women enterprise schemes owed Sh1.5 billion of which Sh1.1 billion had been outstanding for more than one year.

The fund’s loan policy mandates settlement of dues within a year.

“Management did not explain the measures instituted to recover the loans,” the report reads.

A further Sh695 million in digital loans issued to 15,234 groups in 2023 has also turned sour.

"Management did not demonstrate measures in place to recover the outstanding loan balances," Gathungu noted.

Auditors further discovered 6,192 groups accessed Sh307.9 million using duplicate contract loan IDs.

At the same time, 569,258 members were registered in more than one group and drew multiple loans against the same identity.

The situation is so dire that the Women Enterprise Fund continues to operate at a loss and recorded a deficit of Sh261 million.

Gathungu said the fund was operating at a loss, “which if not managed, may affect its future operations and sustainability of services.”

“There is a risk the fund's being technically insolvent’. The fund may be unable to meet its financial obligations as and when they fall due.”

It also emerged that the fund has no control over a digital platform it created to best manage the disbursements.

The Fund disbursed Sh941 million through the platform, Gathungu pointing out that the lack of control led to massive duplication and fraud.

“The effectiveness of the controls over the disbursement system could not be confirmed,” the auditor general said.

Youth Enterprise Development Fund is equally drowning in non-performing loans, with Sh2.05 billion not serviced for more than three years.

Auditors established that some of the borrowers cannot be traced. A total of Sh3.1 billion remained unpaid as of June 30, 2025.

The report shows that the Youth Fund holds Sh32.9 million in loan repayments that it cannot attribute to any specific borrower.

It further emerged that some of the amounts were over three years, with reconciliations not yet done to update borrower accounts.

"This may lead to misstatement of receivables," the auditor warns, adding that the recoverability of the Sh3.1 billion couldn’t be confirmed.

More troubling is that the fund has no adequate staff capacity to help in the recovery of the outstanding amounts.

The Youth Fund is 16 officers short of its establishment and relies on 14 officers in long-term acting capacities, some for several years in violation of public service rules.

Beyond the bad debt, the auditor has flagged governance failures in all three funds.

A staffing crisis was noted. The Uwezo Fund has only 29 staff members against the required 393, leaving it to rely entirely on secondments.

The Women Fund had 128 excess credit officers in some roles but zero staff in critical departments like corporate communication.

Illegal board meetings have also been flagged. It emerged that the Women Fund held 41 board meetings (including special sessions) without required approvals.

Board members also illegally participated in staff recruitment, with details showing they conducted interviews and shortlisted candidates.

All three funds presented budgets that did not balance, violating the Public Finance Management Act.