YOUTH ENTREPRENEURS AND THE SOCIAL AND SOLIDARITY ECONOMY: THE CASE OF KENYA

ByFredrick Wanyama,School of Development & Strategic Studies,Maseno University, KENYA.

INTRODUCTION

• Large proportion of the youth is unemployed – 70% of the unemployed in Kenya are youth

• Employment interventions have targeted “non-conventional” opportunities in areas like informal sector for self-employment

• The social and solidarity economy a key promoter of self-employment

• Comparatively smaller proportion of the youth participate in social and solidarity economy

• Less participation of youth in SSE attributed to:– The preoccupation with getting “white-collar” jobs– Lack of appreciation of the power of collective action in solving socio-

economic problems– Dependence on parents, siblings and spouses– Lack of resources to contribute to SSE activities– Single youth don’t face household challenges

• Given the little presence of the youth in SSE, can the SSE approach create employment for the youth?

• Purpose:• To illustrate how the SSE financing modalities have enabled a government-sponsored

Fund to create jobs for the youth in Kenya

YOUTH ENTERPRISE DEVELOPMENT FUND (YEDF)

• The Kenya government established the YEDF in 2006– A revolving fund for supporting the youth to start and develop

enterprises for job creation • YEDF uses financing modalities of the SSE:

– Lending to groups rather than individuals to build solidarity among the youth

– Individual borrowers have to belong to groups– Lending through financial intermediaries that are part of the SSE,

e.g. SACCOs– Spearheading the formation of youth SACCOs– Creating Credit Guarantee Schemes for young entrepreneurs

YEDF AND YOUTH EMPLOYMENT• YEDF started with KES 1 billion (US$. 11.7 million)• Government contribution is as follows:

Financial Year Amount (in KES)

2006/2007 1,000,000,000

2007/2008 725,000,000

2008/2009 499,914,170

2009/2010 540,750,000

2010/2011 550,000,000

TOTAL 3,315,664,170

• YEDF value now stands at over KES 6 billion (US$. 70.6 million)

• About half of the fund value is from repayment of loans borrowed by the youth – youth enterprises picking up?

• Funds disbursed through three schemes:– Constituency Youth Enterprise Scheme (C-YES)– Easy Youth Enterprise Scheme (E-YES)– Financial Intermediaries

• A total of KES 5.96 billion has been advanced to youth entrepreneurs through these schemes

THE C-YES• Youth group mandatory for access to C-YES• The youth group is expected to be:

– Registered for at least three months– Based in the constituency– Proposing/undertaking a business activity– Operating an active bank account

• By September 2011: – Had advanced KES 545.3 million to 12,407 youth group enterprises– Exact number of jobs created not available, but estimated at a minimum of

40,000 self-employed jobs• It has motivated the youth to embrace mutual support to seek

financial services to do business

E-YES• Builds on the gains of the C-YES • Targets individual youth entrepreneurs within groups that

successfully repay C-YES loans• Groups that successfully repay C-YES loans can also borrow

from E-YES• Individuals can borrow up to KES 100,000 and groups up to

KES 400,000• By September 2011:

– KES 54.2 million advanced to 2,111 entrepreneurs– 2,111 self-employed jobs created for the youth

FINANCIAL INTERMEDIARIES• On-lending to youth-owned enterprises through financial

institutions like banks, SACCOs, and micro finance institutions

• YEDF gives term loans to intermediaries at 1% interest • Intermediaries on-lend to youth entrepreneurs at 8%

interest• Loanable amount depend on the nature of business, but

does not exceed KES. 1 million• YEDF has partnered with 37 intermediaries that on-lend to

the youth

• By September 2011: KES 4.6 billion disbursed

• 129,385 jobs directly created for both male and female youth entrepreneurs

• 24 youth SACCOs formed to be intermediaries• In total, YEDF has created over 300,000 jobs

GENDER ENTREPRENEURS AMOUNT (KES)

Male 65,103 2,657,189,396Female 64,281 1,957,864,738TOTAL 129,385 4,615,054,135

CHALLENGES ENCOUNTERED• Inadequate disbursement and repayment

infrastructures in remote rural areas:– Difficulties in reaching the youth– Youth fail to repay loans in time

• The youth lack skills for managing their enterprises• Some members of groups leave to take up college and

wage employment opportunities• Insufficient policy and legal framework to support

growth and sustainability of youth enterprises

CONCLUSION• The SSE approach has enabled YEDF to create over

300,000 jobs for the youth in 5 years• With 4 million youth unemployed, YEDF might have

helped just 9% of the unemployed youth to find jobs• Though modest, the contribution is significant• What has accounted for the relative success?

– The availability of capital from which to borrow– Entrepreneurship training & business development services– Solidarity and mutuality among youth as a condition

LESSONS FOR SSEO• Solidarity and mutuality embedded in SSE is clearly an

asset for youth entrepreneurship• Availability of a larger capital base is critical for youth

enterprise development. SSEs should strengthen their financing mechanisms

• Improved financing need to be accompanied by entrepreneurship training and business development services

• With these remedies, SSE has the potential to create jobs for the youth

QUESTIONS• What is the experience with youth participation in the

SSE in your country?• What should be done to improve youth participation

in SSE?• How can the SSE improve its capital base to support

youth entrepreneurs?• Are the youth ready to do business?• What are the challenges facing youth entrepreneurs

in your country?