Youth development as a panacea to economic growth

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It is rather disheartening that the policymakers of the Sustainable Development Goals (SDGs) did not list youth development as an independent goal. Youth related targets were listed under the broader SDG number 8: Promote inclusive and sustainable economic growth, employment and decent work for all. Yet, the number of youth not in education, employment or training continues to rise, especially in the South-South countries, which constitute the largest portion of developing nations.

This demographic is growing exponentially in many countries and it leads in the rural-urban migration. However, without gainful economic engagement and appropriate skills to guarantee employment, majority of young people end up disillusioned, destitute, and angry at the system for neglecting them. And when they start families, they contribute greatly to urban poverty. For those who are educated, lack of jobs lumps them together with unskilled and semi-skilled youth. this is a ticking time-bomb. In countries like Nigeria and Tunisia, it is not uncommon to find post-graduates doing menial jobs to make ends meet, while in Tunisia and Egypt, uprisings have been led largely by angry youth dissatisfied by the status quo.

In Kenya, we are having more and more educated young people unable to secure jobs. Cities and towns are finding a greater influx of youth emigrating from upcountry and a revolt is beginning to ferment. 40 percent of Kenyans are unemployed and almost 70 percent of these are youth. You’d be hard pressed to find youth who are happy with the government in Kenya. Everyone has an opinion on what the government should do to help the youth.

The government on its part has not been very creative in solving the youth crisis. Successive governments have experimented with various interventions, key among them being the establishment of the Youth Enterprise Development Fund (YEDF), the on-and-off ministry of youth, etc. Kenya is like a first-time parent who isn’t quite sure how to handle a son who has grown into young adulthood: “do we give him space, do we go hang out together, do we force him to get a job or do we ‘open’ a business for him, can we force him to do this or that, or do we sit and do nothing?”

Mr Ronnie Osumba, the chairman of YEDF is categorical that Kenya’s youth is an invaluable resource. “The large population of educated Kenyans is a resource. By putting them to work through the various government initiatives, we shall reap the demographic dividend.”

Ten years ago, president Mwai Kibaki’s administration came up with an initiative for empowering unemployed young adults through the extension of micro-credits to groups. Consequently, the government established what is popularly known as the Youth Fund and later the Women Development Fund.

YEDF has returned good results, amid management wrangles and impropriety by its revolving door of chairmen. It is imperative that when the government conceptualized these Funds, there was no precedence locally or internationally. And therefore, any social-economic impact evaluation of the Funds ought to take that into consideration. Relying on nothing else but viability studies, with no country to benchmark against, Kenya had a good thing going. Youth Fund was the talk of town. From all walks of life, youthful Kenyans organized themselves into groups in order to qualify for loans.

During its ten years of operation we have made tremendous progress in the discharge of our mandate. Specifically, we have disbursed loans worth Ksh11.7 billion to 886,313 youth across the country, trained 364,368 youth in entrepreneurship, supported 5,644 youth to access markets for their products and secured trading spaces and incubation services for 493 youth. We have also facilitated 20,976 youth to obtain jobs abroad,” says Osumba.

The Fund finances businesses in almost all sectors, with majority of them being agribusiness and trade. “73 percent of the beneficiaries are male while 27 percent are female. It is important to note that many of the female youth may be borrowing from the Women Enterprise Fund,” he says adding, “Our initiatives have directly empowered 886,313 youth across the country. These youth are now self-employed and are paying taxes. They have in turn employed other youth.”

But those numbers notwithstanding, the real effect in transformation is what counts. Is there sustainability for many of the businesses started or do they operate for a few months, repay (mostly) the loans and then succumb to the vagaries of the market; or do they transition into fledgling businesses that can be able to borrow from the commercial banks and thrive?

Normally, nine out of every ten startups fail within three years, and this is where the promoter has, on most occasions, an academic and or ample work experience coupled with an entrepreneurial competence. In instances where the loan recipients are a motley of friends and acquaintances, engaging in semi and informal underfunded businesses, the chances of survival are even slimmer.

Osumba says that the Fund has laid ample mechanisms to mitigate failure arising from owner incompetence. “The Fund provides training and other business development support services essential in nurturing and growing the young entrepreneurs. We also support them with marketing and linkages to enable them to reach and grow their markets. We are also working with other government and non-governmental organizations in order to synergize our business development support services and build on each other’s gains,” he says.

Nonetheless, there are perceptions that the fund has lost its shine, owing to the stringent requirements and the amounts of money loaned. But Osumba is quick to emphasize that the Fund is still very popular. “The only difference is that we currently have more youth focused initiatives as opposed to the past when Youth Fund was the main initiative. We are reengineering to ensure that we are more relevant to the youth. We are also enhancing partnerships so that we are able to leverage on the resources and efforts of other institutions. In addition we have introduced programs to enable the youth take advantage of new youth focused initiatives. For instance we have introduced LPO financing to enable youth take advantage of the 30% Affirmative Government Procurement Opportunities (AGPO). AGPO and YEDF are very different. YEDF provides finance and business development services while AGPO provides a market for the youth owned enterprises,” he says.

YEDF has an officer at every sub county headquarters. Loan applicants visit these officers, discuss their business ideas with them and are assisted to fill application forms which are then sent to Nairobi for processing. The applicants must undergo a compulsory pre-financing training. Youth financing helps put youth to work thus enabling us to reap the demographic dividend.

The Fund now has varying loan limits. Group loans go up to Ksh500,000 while Business expansion loans go up to Ksh2 million. LPO loans go up to Ksh20 million while Bid bonds go up to a maximum of Ksh2 million. YEDF loans are interest free except for business expansion loans, which attract interest at the rate of 8%. “Requirements are favorable to the Youth and there’s a wide range of loans to choose from. YEDF is working on improving the turnaround time to two weeks,” says Osumba.

And just like other countries have come to Kenya to learn how public services like Huduma Centres work, so have various countries understudied the youth financing model. “We are not benchmarking with other countries. They are benchmarking with us. We are the leader in this initiative. The Fund has become a case study for other countries in the region. Among the countries that have visited to learn from our model include Uganda, Rwanda, Burundi, Zimbabwe, Zambia, Malawi, Nigeria, Namibia, Ghana and Botswana. This clearly demonstrates that Kenya was a pioneer in this initiative especially within Sub-Saharan Africa,” says Osumba.

Facts and Figures Box

Youth Enterprise Development Fund achievements:

Product

Amount

Enterprises

C-YES

1,649,405,980.70

18,229

E-YES

295,924,776.41

7,477

Agrivijana

77,385,296.00

221

Angua Chicks

28,568,610.00

134

LPO Financing

233,626,590.00

374

Bid bonds

77,705,174.00

144

Vuka loans

261,076,000.00

523

Financial intermediaries

9,062,065,466.00

231,109

Grand total

11,685,757,893.11

258,211

Total number of beneficiaries

886,313 youth

Repayment

YEDF repayment rate varies from product to product as follows:

  1. Vuka – loans given to youths who are already in business for business expansion.

Repayment Rate: 90%.

  1. Group Loans – these are loans given to group as a whole or individuals in a group.

Repayment Rate: 80%

  1. LPO Loan

Repayment Rate: 60%

  1. Agri-Vijana Loan- loans for Green Houses

Repayment Rate: 46%

2 Comments to “Youth development as a panacea to economic growth”

  1. Ronnie Osumba says : Reply

    Thanks for helping spread the word

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