When the government created three affirmative funds — Uwezo Fund, Women’s Fund and Youth Enterprise Fund — the objective was to provide group loans to promote self-employment and job creation with mostly young adults and women marked as beneficiaries.
But years down line, a review has shown that the funds have failed to meet their objectives amid concern that they mainly benefited women, wealthy individuals and rich counties — locking out a huge proportion of needy Kenyans.
“The three funds show considerable coverage gaps in terms of fund allocation and geographical presence.
“Differences in the ratio of disbursement and allocation for the Uwezo Fund show that offices in disadvantaged counties disburse a lower proportion of their allocated funds,” the World Bank points out in its study.
“Furthermore, disbursement per group varies across counties for the Uwezo and Women’s Fund. These issues raise concerns about equity and targeting of the three funds and can be paid closer attention to in the future.”
Uwezo Fund was created after the presidential election in 2013 with the remaining Sh6 billion of campaign funds.
The fund provides interest-free credit to women, young adults and persons with disabilities to fund their businesses.
To be eligible, groups need to have nine to 15 members, exist six months before the loan application and need to consist of at least 70 percent women or 70 percent youth.
Before their loan is disbursed, the groups are required to attend a capacity-building programme that spans over three-months.
The training covers information about business development services, table banking and details on access to government procurement.
Groups are treated preferentially for government tender processes.
The Women’s Fund was created in 2007 to empower women to start or expand their businesses and covers all constituencies in Kenya.
It supports women-led businesses in developing market linkages with large enterprises to increase their reach.
To be eligible for the fund, registered groups need to consist of at least 70 percent of women and must attend a three-day training before loans are disbursed.
After repaying the first loan, groups can access a second loan.
The Youth Fund in its part concentrates on young adults and job creation through self-employment.
The fund also engages in market support, youth employment abroad and the development of commercial infrastructure such as market spaces.
Furthermore, the programme introduces goods and services produced by groups to local and international markets.
To be eligible, groups need to consist of at least five members of which 70 percent need to be young adults.
The groups are required to register at the constituency level. If accepted, they receive their first loan with a grace period of three months.
The fund does not provide a training programme.
An analysis of the three funds, however, revealed massive discrepancies in terms in terms of the intended impact.
“The beneficiaries of Uwezo and the Women’s fund are mostly women. By design, at least 70 percent of beneficiaries of the Women’s and the Youth Enterprise Fund are women or young adults respectively.
“The Uwezo Fund targets both women and young adults. Of its beneficiaries, over two-thirds are women and four percent are persons with disabilities,” the World Bank noted.
The coverage of the three funds is unequal across counties, with poorer counties displaying the lower concentration of groups.
Participating groups of the three affirmative funds are not equally distributed or in proportion to the population across Kenya.
“Counties such as Nyandarua, Nyeri and Embu have more than 13 groups per 1,000 individuals, whereas counties like Mandera, Turkana and West Pokot have less than 2.5 groups per 1,000 individuals. The coverage of the three funds is low in poorer counties,” the study observed.
Further, loan disbursement of the Uwezo Fund is lower in poor counties, indicating differences in credit contexts.
Uwezo Fund county offices receive an allocation of funds for loan disbursement. These funds are used according to a revolving loan approach: Once one loan is repaid, a new loan can be disbursed. Hence, it is possible to disburse an overall higher sum than the allocated amount.
For example, Nyandarua was allocated Sh95 million between 2014 and 2017. The county office, however, disbursed more than Sh 123 million, suggesting that loans were repaid and re-disbursed.
On the contrary, West Pokot received overall Sh90 million but only used Sh77 million.
“Underspending is more prevalent in poorer counties compared to richer counties, which often display a ratio of disbursement over allocation above one.
“Faster repayment cycles can explain overspending in some counties. Counties that underspend might face longer repayment cycles, fewer groups or an overallocation of funds” the World Bank said.
Discrepancies were also noted in loan disbursement per group, which varies across counties for the Uwezo and Women’s Fund.
“The average funds disbursed per group for the Women’s Fund varies across counties with arid and semi-arid regions having a lower amount of disbursed per group.
“This suggests that groups in non-arid and semi-arid areas receive more often a second loan.
“The Youth Enterprise Fund does not exhibit any differences between loan size per group across counties,” the study revealed.
The Uwezo Fund provides loans per group ranging from Sh50,000 to Sh500,000. The differences in average funds disbursed per group demonstrate the variable sizes of loans allocated across counties.
Groups from the Women’s Fund can receive additional loans once repayment of the initial loan is complete.
Inconsistencies were also observed among loan beneficiaries. For example, among eligible individuals, wealthy and uneducated individuals are over-represented.
“Of the three funds, the Uwezo Fund displays the largest proportion of potential beneficiaries in each wealth quintile.
“The richest individuals make up the largest proportion of the potential beneficiaries for all three funds, especially the Youth Enterprise Fund for which 30 percent of potential beneficiaries are in the top wealth quintile” the bank observed.
“Furthermore, more low educated individuals are potential beneficiaries for the Uwezo and Women’s Fund than for the Youth Enterprise Fund.
“With almost three-quarters of potential beneficiaries having completed primary education or less, the Women’s Fund displays the highest share of low-educated potential beneficiaries” the World Bank report added.
The study advises that even as the government seeks to collapse the three funds into one, steps ought to be taken to ensure more accurate targeting is done so that those who deserve the interventions get the most of the funds.