Comprehensively discuss the government lending agencies in Kenya and give a detailed presentation of arguments for and against.

i) AFC (AGRICULTURAL FINANCE CORPORATION) The Agricultural Finance Corporation is a state corporation created by legislation through the enactment of an Act of Parliament. It is under the Ministry of Agriculture and has the mandate of provision of credit facilities to individual farmers. It draws its funding from the exchequer. It has various types of products in offer to the farmers. It has seasonal credit whereby farmers are financed to plant a crop for one season. It has a short-term credit facility and farmers are financed and repay with 6 months to 3 years. It equally has a long-term facility whose repayment period is 3-5 years. For a farmer to qualify for any of the facilities, he needs to have tangible security i.e. a title deed, which is free of any encumbrances. He as well needs to provide 20% of the total project costs and the loan facility is repayable at 10% interest. The programme is good and noble. Credit is made available to deserving farmers who work tirelessly to feed the nation. This assures them of funds to carry out their agricultural activities and as well profits form the same even after repayment, as agriculture is a high paying enterprise. It as well guarantees the creation of collateral locks out. Provisions for the requirements of collateral locks out individuals who have no access to title deeds for use as security for the credit facilities. The 20% project costs to be footed by the applicant is as well an impediment as an applicant may only have the land, family labour for production purposes and lack the money to foot 20% of the project costs. This ultimately locks out such kind of potential applicants. Loanees who apply for credit facilities and thereafter divert the money to other enterprises have equally abused the fund. In some instances the enterprises fail and the loanees end up losing their much-treasured assets in the name of land charged as security when they default. This has exposed many households to the pain of loss and destitution. Thus, a better mechanism should be employed to ensure disbursement of the money directly into the project in form of inputs and related accessories sourced from suppliers as opposed to situations whereby the loanees are advanced cheques to cash from their individual accounts.

ii) HIGHER EDUCATION LOANS BOARD (HELB) The higher education loans board is a creation of the higher education Act, 1995 (Kenya Gazette Supplement (Cap 213A). it is a fully fledged state corporation which has the mandate of providing loans to students in public and private universities to fund their education. It also funds the education for students in tertiary colleges. It draws its financing from the government through a budgetary allocation by the Ministry of Finance. It also gets revenue accrued from recoveries due for students servicing their loans on acquiring gainful employment on completion of their studies. It has a board of directors and secretariat to man its operations. Deserving students apply for loans to the fund and their applications are evaluated and successful applicants access the money through the various accounts with the commercial banks that they provide to the fund. The higher education loans act has provisions requiring the employers to ascertain the loan repayment status of their employees. This makes it possible for the employers to liaise with the fund and have deductions to the salaries of the employees to facilitate recoveries from them and make the fund have inflows, which ensure its sustainability. The higher education loans act equally has provisions for liaising with the credit reference bureau of the Central Bank and blacklisting all beneficiaries not servicing their loans from accessing credit facilities from the commercial banks. This ensures that the beneficiaries make efforts to repay their loan facilities for the benefit of other deserving individuals in future. The fund can be credited with the making of higher education a reality for many deserving students who would have not managed the same were it not for its existence. On the other hand some deserving cases have been locked out of the programme for unwarranted reasons. This is because the major focus of evaluation is ones family background and previous history. At times the looks can be deceiving and in some instances one may have gone to a high-cost primary boarding school on a sponsorship programme and end up losing out simply because they attended a high-cost primary school thus the impression that the family is financially endowed. Thus a better means of evaluation scrutiny of the applicants background would do the fund a lot of good and enhance its capacity and as well benefit all deserving cases.

In some instances paltry amounts, which may not help much in financing the education, have been awarded. This creates a bigger problem for the recipient in that they have money which is not enough for payment and which at times is diverted to other businesses thus not achieving its intended purpose and as well leaving the recipient in debt. Follow-up mechanisms for beneficiaries not in formal employment and not in the country may be those who get employment overseas are not possible. Thus the fund is left at the mercy of recipients who choose to pay on their own volition thus exposing it to the risk of making losses.

iii) ICDC (INDUSTRIAL AND COMMERCIAL DEVELOPMENT CORPORATION) The industrial and commercial development corporation is equally a creation of an act of parliament. It was formed in the year 1954. It is a wholly government owned agency charged with the responsibility of financing commercial entities for development and growth. It has provision for both medium and long-term finance products in its portfolio. Its main focus is to spearhead industrial development in the country as a development finance institution. Many of the local industries owned by the Kenya entrepreneurs have been born out of its programmes. Eligibility for consideration entails the registration of a company, application for the facility with collateral in place to guarantee security for the facility in case of defaults by the organization. The fund is very noble but the conditions for eligibility are beyond the reach of many local enterprises. The provision for scrutiny and monitoring of applicants and disbursement in tranches makes it more stringent and difficult for small industrial and commercial concerns to benefit form the fund. Its thus viewed as a preserve of the already successful industrial concerns seeking to expand and growth their businesses. iv) WEDF (WOMEN ENTERPRISE DEVELOPMENT FUND) The Women Enterprise Development Fund was conceived in the year 2006 and started in the year 2006 and started in the year 2007. It was established to provide alternative financial services to women who are excluded from the formal and informal financial sectors. It was

established through the promulgation of the women enterprise regulations under section 26 & 35 of the Government. Financial Management Act, 2005, Legal Notice No. 147 dated 3 rd August 2007. The fund provides accessible and affordable credit to support women start or expand business for wealth and employment creation. Its a flagship government project in the vision 2030 blue print and it demonstrates Kenyas commitment to the realization of the Millennium Development Goals on gender equality and women empowerment. The target beneficiaries of the fund are women aged 18 years and above. Women may in registered Self Help Groups, individuals and companies own them. The fund receives support from the government through the annual budgetary allocation. The fund is a fully-fledged state corporation under the Ministry of Gender and Social Services. The fund disburses its loans through constituency women enterprise committees and through financial intermediaries and commercial banks liaising with the government on the programme. The maximum loan that an individual can get form a financial intermediary if 500,000/= at an interest of 8% payable on a reducing balance for a maximum of 36 months. This is subject to the provision of a soft collateral. For organized groups, the constituency women enterprise fund committees approve their applications and send them to the fund headquarters. The group is eligible for a loan of 50,000 with no interest but a 5% management fee is charged upfront. The fund has really helped spur growth and development in the country. This is by virtue of the fact that provision of credit to a woman enables her grow her business and helps her family and household. It has turned around the fortunes of women who previously wouldnt access credit for lack of collateral. The undoing of the fund is the requirement for one to be in a group in case they dont have collateral. This makes individuals who dont like the group activities shy off and fail to benefit. The maximum amounts that the fund can give an individual is 500;500. Many consider this a paltry figure for worthwhile business thus shun the fund altogether.

v) K.I.E (KENYA INDUSTRIAL ESTATES) Kenya Industrial Estates started in the year 1967 as a subsidiary of ICDC. It is a state corporation under the Ministry of Industrialization. It has a board of directors appointed by the ministry of industry and a chief executive officer who is responsible for the day to day operations of the organization. It has offices countrywide with staffers manning and coordinating the activities and reporting to the headquarters. The core mandate of the Kenya Industrial Estates is to facilitate industrial growth by way of credit provision to the deserving cases especially so in the pre-urban and rural areas to spur growth and development in the country. It started by way of putting up sheds for the business people in the informal sector and giving the credit to set up businesses in the facilities. This has greatly improved the mainstay of many rural households by way of provision of opportunities to do business. Eligibility for credit facilities entails one having an already existing business in need of expansion or a business plan, which enumerates how the start up will be funded, and realize its growth and revenue for credit facility repayment. Collateral is imperative in the name of title deeds, car logbooks and guarantors as well for the money. Its a very noble idea but which had unfortunately been abused by the technocrats in the public service bureaucracy and politicians and had been turned into a cash cow and almost milked dry. It had to be given a kick-start in the year 2003 to get it back on its feet again after most of the loanees who were in good books with the former regime defaulted on loan repayments. It has had a total overhaul of its systems and more stringent and closer scrutiny is done on the loan applicants before disbursing the money. This ultimately guides it from further exploitation by crooked individuals. It has an undoing of demands for collateral. This effectively locks out the youth and women who are considered economically vulnerable in terms of marginalization. It thus excludes they that would have brilliant ideas and fail to have collateral form its programme. Stringent monitoring ensures that the money is spent for the intended purpose. This is whereby incase of financing to acquire machinery the organization deals with the supplier of

the same directly and the client has the same delivered to them. This effectively seals the loophole of diversion of funds form their intended purpose.

vi) COFD (COFFEE DEVELOPMENT FUND) The Coffee Development Fund is a creation of legislation by way of the amendment of the coffee Act 2001 and gazettement of the same in the year 2005. It is under the Ministry of Agriculture and it has the mandate of provision of credit and advances to coffee farmers for the improvement of coffee farming and production activities in the coffee industry. This is brought about by the fact that coffee earns the country a lot of revenue in form of foreign currency after sale sin the international markets. It thus requires a lot of nurturing and motivation to the farmers growing the crop to realize worthwhile returns from the industry. The fund has budgetary allocation from the Ministry of Finance. Its main purpose was to help revive the sector after many farms had started withdrawing form coffee production owing to high operational costs and the low international prices. It has lived to the realization of its objectives after the industry has had a turn around owing to the improvement on the farms after the acquisition of credit by the farmers. This is evidenced by the increased production in the recent past and the realization of better quality driven by good husbandry practices. The funds main undoing is that it targets coffee farmers only. It as well deals with farmers who have mature coffee plantations because the advances are recovered from the sales. Thus farmers with immature plantations are not eligible for acquisition of credit facilities from the fund. vii) YEDF (YOUTH ENTERPRISE DEVELOPMENT FUND) The Youth Enterprise Development Fund is as well a statutory body anchored by legislation. It was established through a gazette notice of the Government Financial Management Act, 2005 dated 1st February 2007. It is under the Ministry of Youth and Sports. Its a fully fledged state corporation with a secretarial and a board of directors overseeing its operations.

It was conceived to help create employment amongst the youth by way of provision of credit to fund business start-ups and the expansion of existing businesses. It draws its funding from the exchequer by way of budgetary allocation. It disburses money by way of liaising with banks, which are loaned the money for onward transmission to individual youth and those in groups. The constituency youth fund committee as well facilitates the provision of credit to organized youth groups in the various constituencies nationally under the direction of the youth officers on the ground. Money disbursed by the constituency youth fund committees is only eligible for groups. It attracts a management fee of five percent paid upfront but does not attract any interest. Money disbursed by banks attracts 8% interest paid on a reducing balance and is eligible for youth groups and individuals as well. The eligibility for the fund is youths aged between 18-35 years and soft collateral incase of individuals dealing with banks and other financial intermediaries. The group lending methodology is applied for organized groups whereby we have individuals co-guaranteeing each other in organized groups. The fund has really helped many youths who have no access to collateral obtain credit for business start-ups and expansion. It has as well greatly spurred economic growth by way of the facilitation of acquisition of capital equipment like photocopy machines and computers for business in the critical segment of the youth population. This has ultimately helped increase the disposable income of the youth thus increased their purchasing power and its a boost to the economy. The fund has the undoing of the requiring one to be an organized group incase of lacking some collateral. This affects many people in the sense that a lot of time is taken in meetings and the group dynamics affect the individuals in them in many ways. Delinquents in the group force the good members to dig deep into their pockets and pay for them. REFERENCES i) ii)
iii)

Kenya Gazette Supplement Notice (1995) (Cap 213A) ICDC Annual Report (2010) Women Enterprise Regulations (Legal Notice No. 147 3rd Aug 2007)