Rethinking the Youth Fund

By Agnes E. Nantaba

After EPRC report says it failed to create jobs, Labour ministry is reloading it

Mondo Kyateka, the Assistant Commissioner for Youths and Children Affairs in the Ministry of Gender, Labour and Social Development, is in the middle of an important assignment.  His ministry is currently engaged in moving one of  Uganda’s flagship projects;  the Uganda Youth Venture Capital Fund (UYVCF), from the Ministry of Finance Planning and Economic Development to the Ministry of Gender Labour and Social Development.

But the switch has come at a difficult time. A recent report by the Makerere University- based Economic Policy Research Centre (EPRC) says the Venture Fund has failed on one of its major targets – creating jobs for the youth.

It says although there has been some positive impact of the fund on business expansion, there is no significant evidence on jobs creation.  Although the UYVCF has been a Ministry of Finance project, the Ministry of Labour has received most of the criticism.

Mondo is readying his team at the Ministry of Labour to repackage the UYVCF under a new model, the Youth Livelihood Programme which is the brainchild of the ministry Permanent Secretary, Pius Bigirimana.

“The ministry of Gender plans to rectify the past mistakes in delivering the approach to suit the needs and interests of the major stakeholders who are the youth and gradually reduce youth unemployment in the country,” says Mondo in reaction to the EPRC report.

According to the Ministry of Labour, Uganda has an unemployment rate of 2.1%.  The Uganda Bureau of Statistics put that at 4.2%. An unemployed person is one who has not worked in the last seven days before the survey. If someone is working but works for less than 4 hours a week, they are considered underemployed. That figure stands at 8%. Most of the unemployed are youth. In a country with one of the youngest populations in the world and over 78 percent being youths aged 18-30 years, they comprise at least 62 percent of the total unemployed persons, according to a report by Action Aid titled “Lost Opportunity” Gaps in youth policy and programming in Uganda. That is the highest youth unemployment rate in Africa, but the African Development Bank says it could be as high as 83%.

To tackle the problem, the government in 2011 established the Uganda Youth Venture Capital Fund as a means of facilitating the youth to create jobs for themselves. Up to Shs25 billion (Approx. US$ 10 million at the time) was injected into it.

Under the plan, the money was to be deposited on commercial bank accounts for the youth to borrow under specific criteria. But, as the recent EPRC report appears to show, the UYVCF, failed to create jobs.

The report titled ‘Creating youth employment through entrepreneurship financing: The Uganda Youth Venture Capital’,  shows that the beneficiaries are mainly retail traders (trade and commerce) who received the highest funding rated at 53.6%  who may not necessarily employ extra people because they have invested an extra amount (on average Shs3 million) into their businesses.

The report shows that the employment creation results based on years 2011 and 2013 indicate that the base year average number of employees was just about the same (not significantly different) for both the youth fund beneficiaries and non- youth fund beneficiaries at an average of three employees per enterprise.

“Although benefiting businesses were required to create employment for at least four people by the end of the loan, there was no solid impact on business expansion,” the EPRC report reads in part. The report recommends eliminating the obstacles to self-employment.

It says the mean value of the businesses (in nominal terms) for the fund beneficiaries and non- beneficiaries in 2011 was Shs2.7 million (Approx. US$1000) and Shs3.5 million (Approx.1400 or the price of a laptop computer), respectively which indicates no significant difference.

An estimated 3,984 business enterprises had borrowed money from the Youth Fund by close of December 2012.

Trade and commerce is not the only eligible sector for youth funding. Other sectors according to the Ministry of Finance Planning and Economic Development 2012 manual include manufacturing, agro processing, primary agriculture, fisheries, livestock, health, transport, education, tourism, Information and Communication technology (ICT), construction, printing, and service contractors. Compared to those owning service-based enterprises, the youth in agricultural based enterprises are the least likely to participate in the Fund.

But Francis Niwagaba, a legal advisor in Stanbic bank told The Independent that the fund should look beyond the traditional ventures and include the emerging technology sector.

“The skilled but unemployed youth need to be supported to harness the benefits in the technology sector,” he says.

Comprehensive approach needed

Ibrahim Kasirye a senior research fellow from EPRC and co-author of the report agrees. He says youth entrepreneurship can be best promoted through a comprehensive approach that emphasises lending to productive sectors with high job creation potential which also have higher value labour intensive chains to achieve lasting impacts.

To achieve a national outreach and impact, Kasirye recommends that the design of the fund should take into account the heterogeneity of young people in terms of rural and urban location, gender and stage of business.

The report recommends instituting a strong monitoring and evaluation framework with measurable indicators designed to track the number and quality of jobs created and their distribution based on gender and location.

But Fred Kakongoro Muhumuza an expert economist who was also part of the team that designed the Youth fund and regularly follows up on progress, defends initiative on job creation. He says it was not designed as the magic bullet against unemployment. He says the `Youth Venture Capital’, as the name suggests, targeted providing venture funds to adventurous youth who have ideas but have no credit or business history and, therefore could not be funded by commercial banks.

“It was not to resolve the youth unemployment as that is a bigger assignment,” he told The Independent, “It was only to contribute towards that cause. It should therefore not be judged in that broader context.

“The initiative has had a lot of impact as more than 3000 youth projects have taken off and many are still running under direct bank financing.”

Under the UYVCF, Centenary Bank disbursed about 81% of the total amount of released funds which translates to about to 67% (about Shs11 billion) of the total value lent out by Dec 2012.

In terms of value/money, just about Shs16 billion had been disbursed by the three participating banks.

Ibrahim Kasirye said that the beneficiaries indicated Centenary Bank as their bank of choice because most were already running accounts with it.

“Other beneficiaries pointed out the rather lengthy and stringent lending procedures at other participating banks while some lacked the knowledge that other two banks (DFCU and STANBIC) were implementers of the UYVCF,” he said.

Mondo told The Independent that the other participating banks are not used to dealing with youths and rural people. He, however, said that the failure of more youths to access the funds in DFCU and Stanbic Bank should not be blamed on the banks because they, at least, were the only banks willing to partner as participating institutions.

The plan to re-package the Youth Fund as the Youth Livelihood Program is being seen as a partial solution to one of the major failures of the fund highlighted by the EPRC report. A significant boost of Shs265 billion (about US$ 100 million) to the Youth Livelihood Programme (YLP) to cover a five-year period was unveiled in September 2013.

The YLP hopes to use of better parameters and participating institutions to achieve greater success in jobs creation among youths. Mondo says it will also create a better platform for monitoring and evaluation of the programmes.