Youth Fund to go after loan defaulters
It has emerged that close to 80 percent of businesses funded by the Youth Enterprise Development Fund are yet to pay back their loans.
According to the fund Sh500 million worth of loans are yet to be repaid, with plans underway to recover the money. The high default rate has been attributed to the lack of market linkages more so amongst start ups which end up collapsing two years after being set up,
Youth Fund Chairman Ronald Osumba said the fund’s recovery rate continues to dwindle with a mere 24 percent of borrowers showing the ability to sustainably repay their loans. This has seen the youth fund invest in automating its systems to ensure it’s able to recover loans.
“We absolutely must streamline our processes to bring in efficiency,” Mr Osumba said.
With the high default rate, the youth fund faces a challenge processing friendly rate type loans for other emerging businesses.
To ensure the fund is able to efficiently process loans and scale up business, it plans to partner with market leaders to ensure those borrowing have guarantee to repay.
“We will ensure that we are only lending to people who have secured supply contracts,” he said.
Lack of knowledge among prospecting borrowers is another impeding factor. Only two out of five people are said to know about the youth fund, and one out of the two has details of how it works.
To make the Youth Enterprise Development Fund more robust, Mr Osumba said the investment in IT will be crucial to make the fund as competitive as commercial banks.
This will see the fund process loans in less than 48 hours and introduce a mobile app that resonates with the youth.
“We plan to invest in robust and efficient systems that will lay the foundation for automation and availing our service on the mobile phone platform that is popular with our youth. We shall also revise our service charter and make it more customer focus,” Mr Osumba said during the launch of the rapid results initiative.
Through the initiative, the fund plans to recover an estimated Sh300 million of the unpaid loans in the next three months.
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