The government should structure funds for supporting enterprises through competent, preferably private-sector channels to achieve the best outcomes.
Reports that beneficiaries of the Uwezo Fund, the Jubilee government’s support for youth groups, women and People Living with Disabilities (PWDs), have defaulted on Sh4.6 billion is an indication of how faulty the lending structure of the fund through constituency offices was.
Set up in 2014, Uwezo has disbursed over Sh7 billion, with the beneficiaries having repaid only Sh2.5 billion, representing a repayment rate of 39.5 percent.
The government now wants to enlist the support of chiefs and engage youth groups across the country, to enhance repayment.
The State is not the most efficient when it comes to lending since it lacks the mechanisms for measuring credit risks and the infrastructure to follow up payments with borrowers.
Beneficiaries also tend to treat state loans as grants, as Uwezo Fund management noted the initiative was misconstrued to have been set up to issue free cash, which prompted defaults.
It would be more efficient if such funds are channelled through the private sector institutions such as banks, who have mechanisms to assess the strengths of the enterprise being lent to, keep good records and follow up on repayments to ensure the money is not lost.
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