Determinants of repayment of loans advanced to the Youth by the government through youth enterprise Fund. A case of Mumias District

Abstract

Youths in Kenya are provided with funds through the government sponsored youth enterprise funds in order to enhance business opportunity among them. However, there is normally a great challenge among these youths who have been provided with the youth enterprise funds to repay the borrowed loans. This study looked at the determinants of repayment of loans advanced to the youth by the government through youth enterprise fund in Mumias District. Specifically the objective were to: assess how amount of credits borrowed determine repayment of the youth fund in Mumias District; establish the influence of the interest charged on loans on the repayments of the youth fund in Mumias District; determine how training programmes by the youth fund agents influence the repayment of the youth fund in Mumias District and determine influence of duration of credit repayment on the repayment of the youth fund in Mumias District. This study was conducted through cross-sectional survey research design. A two stage sampling method was employed to select 72 youth enterprises in the district who have been provided with the youth enterprise funds and 54 that did not get any loan. Structured questionnaires and interview schedules were used for collecting quantitative data for the study from the sampled youth enterprises. Descriptive statistics using frequency distribution, percentages and means was used to summarize data. The results of the study reported in this research project report indicate a propensity to default repayment of loans by youth groups. This came with a challenge of always not acquiring the desired finances, and problems in accessing the finances, which affected repayment. Further, delays in disbursing the fund, repayment period of loans and training programmes for the youth groups were found to be a major challenge. These results suggest that repayment of loans can be determined by amount of funds borrowed, training programmes, duration of loan repayment and ease of credit access. The findings of the study reveal that there is a tremendous need for availing large loans, training, fast tracking loan processing for the youth groups. Added to this, the study highlights strongly the lack of business management skills. It further recognizes the financing constraints and challenges youth groups are facing. Therefore, the youth stakeholders need to urgently implement supportive legislation to create an enabling environment for youth groups to grow, access credit and training that will enhance repayment of the borrowed loans.