Heavy Loans Default Rate Rocks Youth, Women Funds

Revolving funds that were meant to help Kenyan youth and women start businesses are chalking up bad debt, causing fear of a looming liquidity crisis that could also rob them of support from financiers, Business Daily reported. Fund managers said there has been a huge build up of bad debts in the past 12 months forcing them to consider involving the provincial administration in the disbursement of new loans. “The chiefs know these youths, they can help us to trace their homesteads and we will speak with them on how to restructure their repayments,” says Evans Gor, a director of the Youth Enterprise Development Fund. Default rates in both funds stand at more than 40 per cent causing some financial experts to warn that the projects risk joining the long list of white elephants that saw the government dole out credit to targeted groups such as farmers only to write them off at the expense of the taxpayer. At 40 per cent, the default rate of the Youth Fund is way above that of the banking industry, which currently stands at about eight per cent of the Sh783 billion that local banking sector had lent by February 2009. According to the Central Bank of Kenya the gross non-performing loans in commercial banks increased from Sh61.5 billion in February last year to Sh63.2 billion in February this year. Read more.