Money Markets

New law to convert Youth Fund into a bank

An SME exhibition in Nairobi. The proposed increased funding and restructuring of the Youth Fund is meant to help grow reach of the credit facility from the current 160,000 youth enterprises to about two million within the next two years. Photo/FILE

An SME exhibition in Nairobi. The proposed increased funding and restructuring of the Youth Fund is meant to help grow reach of the credit facility from the current 160,000 youth enterprises to about two million within the next two years. Photo/FILE 

In Summary

  • The bank will be structured to take deposits and give credit facilities specifically to young traders aged between 18 and 35 years.

The government is set to increase its annual allocation to the Youth Enterprise Development Fund to about Sh14 billion as it seeks to transform the revolving fund into a bank in the next five years.

The bank will be structured to take deposits and give credit facilities specifically to young traders aged between 18 and 35 years. This will make it a specialised deposit-taking development finance institution (DFI).

In the 2012/2013 financial year, the government allocated the pool Sh468 million. The proposed increased funding and restructuring of the Youth Fund is meant to help grow reach of the credit facility from the current 160,000 youth enterprises to about two million within the next two years.

The draft National Youth Enterprise Development Bill proposes to peg the Treasury’s allocation to the agency, for the next five years, to at least two per cent of all government revenue to build a strong war chest necessary to meet the ever-increasing financing needs of Kenya youth-led businesses.

“The funds and assets of the authority shall comprise not less than two per cent of all the government ordinary revenue collected every year, for the first five years after the commencement of this Act,” reads a section of the draft statute.

If adopted, the proposal will require a twenty-five-fold increase in allocation to the Youth Fund, ranking it almost at par with the Constituency Development Fund (2.5 per cent) and higher than the Equalisation Fund (0.5 per cent).

“We need more funds to begin funding capital intensive initiatives such as agro-processing and manufacturing,” said Juma Mwatata, the CEO of the fund.

The youth financing platform hopes to use the new lending institution to provide credit facilities, entrepreneurship training and business incubation to a majority of the 14 million who make up a third of Kenya’s population.

The Youth Enterprise Development Fund also said it wants to get into equity financing of viable youth projects and also roll out a Local Purchase Order (LPO) financing scheme to help young traders compete for and deliver in government and private sector tenders.