Women, youth eye cheaper loans as State fund gets closer to reality

Thursday, July 2nd, 2020 00:00 |
Fish traders.

 Steve Umidha @UmidhaSteve

National Treasury has invited public participation in the proposed Biashara Kenya Fund expected to extend financial access to businesses run by women, youth and people living with disability.

Through a Gazette Notice, the fiscal planning office called on interested members of the general public to submit written comments or memoranda on the draft Public Finance Management (Biashara Kenya Fund) Regulations, 2020.

The target group will get loans from the State at six per cent interest under the new Fund which last year received Sh2 billion to jump-start its operations.

“The objectives of and reasons for the proposed Biashara Kenya Fund Regulations are among other factors, to provide a one-stop shop for targeted groups looking for business loans from government and improve effectiveness as well as eliminating duplication of efforts,” reads the notice published on Monday.

Same objectives

In July last year, Treasury announced terms of the Fund’s loans which will also lead to the merger of Uwezo Fund, Youth Enterprise Development Fund and Women Enterprise Fund, arguing that the three Funds had the same objectives.

The decision to collapse the three parastatals into one entity had initially been met with opposition from a section of Members of Parliament in August last year, saying it would be counterproductive as it does not solve the unique problems in the funds’ management.

The Committee on Delegated Legislation also held that the merger was speculative and did not provide tangible strategies to address challenges facing the funds and had not been subjected to a public participation process.

Legislators had also expressed concerns over the possibility of job losses at the three funds, saying the proposal did not provide sufficient transitional provisions for employees, assets, and liabilities—including remedies for defaulters.

Financial vehicle

The new move by the Treasury now seems to have addressed those concerns on a critical Fund that is also seen as an vital financial vehicle that will provide loans to credible commercial banks, micro-finance institutions, registered non-governmental organisations involved in financing, and savings and credit co-operative organisations for on-lending to women, youth and persons with disability.

Biashara Fund will lend part of its money to financial intermediaries such as commercial banks and Saccos for on-lending to the special groups at a maximum rate of 10 per cent.

It will also lend money to commercial banks at an annual interest rate of three percent.

Intermediaries who provide counterpart funding, at least equivalent to the amount advanced by the Fund will, however, repay a minimum interest of one percent.

Financial rules cap the maximum amount that the banks or financial intermediaries can advance a single borrower at Sh3 million – with any member of this group eligible to apply for a business loan if they belong in a registered group where at least 70 percent of the members are aged between 18 and 35 years.

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