Social-Economic, Business Loan and Follow-Up Characteristics and Repayment of Youth Enterprise Development Fund Offered By Commercial Banks in Trans-Nzoia County, Kenya
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Date
2024-06
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Kenyatta University
Abstract
Youth empowerment is vital for any nation. The Kenyan Government initiated the Youth Enterprise Development Fund (YEDF) to empower the youth. The objective of the fund was to provide loans for the youth to start income generating activities. Access to finances among the youth, women and many individuals in the informal sector running micro enterprises remains a great challenge at local, national and international levels. In Kenya, access to finances to individuals and groups who do not have conventional securities remains a great challenge. The Youth Enterprise Development Fund, the Women Fund and the Micro Small and Medium Enterprise Fund are among government initiatives established with an aim of making finances available and easily accessible in partnership with commercial banks to this class of the more vulnerable groups who would otherwise not be in a position to access bank loans. Statistics show that despite the uptake of these loans by youth enterprises, repayment is a big problem as many of them default. National loan recovery currently stands below 25% for the youths for the last 13 years the programme has been in place. However, there is limited evidence on factors behind higher rates of loan default among loan borrowers in Kenya. The purpose of the study was to investigate these factors focusing on youth enterprises in Trans Nzoia County in Kenya. Specifically, the study sought: to ascertain the borrower's social economic characteristics that influence loan repayment of Youth Enterprise Development Funds in Trans-Nzoia County, to ascertain how loan characteristics influence Youth Enterprise Development Funds payback in Trans-Nzoia County, to ascertain how business performance characteristics impacts repayment of Youth Enterprise Development Funds in Trans-Nzoia County, and to evaluate how repayment structure and follow-up measures impacts the repayment of Youth Enterprise Development Funds in Trans-Nzoia County. Information asymmetry, the moral hazard, experiential learning and planned behavior theories were adopted by the study to understand factors influencing loan repayment. The study employed a descriptive survey design. The study targeted youth enterprises in Trans Nzoia County together with the commercial banks which lend them money. The study employed stratified sampling design to select a total of 65 individuals who were interviewed with the use of a questionnaire. These individuals included: 5 bank officials, 5 group leaders and 55 group members. The study used primary data to source for information from the respondents. The questionnaire was utilized to collect data. The collected data was analyzed through the use of SPSS version 20.0 for windows and a panel regression model. Descriptive statistics was employed by the study to analyze data. Among the diagnostics tests conducted include normality tests, heteroskedasticity test, and multicollinearity. The study ensured that ethical considerations were adhered to. The study findings indicated that social economics factors, loan characteristics and business performance character tics influenced repayment of YEDF and that borrower’ follow-up characteristics do not influence repayment of YEDF. The¬ regression results showe¬d a slight increase of units in the loan repayment as social economic factors, loan characteristics and business performance characteristics increased, holding all othe¬r factors constant hence suggesting that borrower, social economic factor, loan characteristics and Business performance characteristics statistically influence loan repayment of YEDF. The¬ regression results showe¬d a slight decrease of units in the loan repayment, holding all othe¬r factors constant hence suggesting that follow-up measures do not statistically influencing loan repayment of YED.
Description
A Research Project Submitted to School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of Master’s Degree in Business Administration (Finance) of Kenyatta University, May 2025.
Supervisor:
1. Dominic Ngaba