How we can ensure greater gains from Uwezo Fund

By Ken Opalo

It is John Donne, the famous poet, who made the important observation that “no man is an island.” This reality of the human condition holds in the economic sphere just as much as it does in the social sphere. Throughout the world, the story of modern economic development is one of people organising out of poverty.

Rarely have societies ever pulled themselves out of penury on account of isolated individual effort. Yes, innovation and positive work habits are individualistic by definition, but it takes a group of more than one to actually realise the gains from innovation and individual effort.

Where am I going with this? Well, last week President Kenyatta launched the Sh6 billion Uwezo Fund meant to help groups of youth and women realise their entrepreneurial dreams. The fund’s group requirement has two distinct advantages.

 Firstly, by availing funds to groups of people, it builds in the gains that come from co-operating with others. Forward-looking and diligent members of groups will influence each other to do the right thing. Secondly, there is ample evidence from micro-finance programmes that groups are more likely to repay loans than stand alone individuals. This is good for the longevity of the fund.

And to guarantee even greater gains, the fund should provide incentives for women and youth to form cooperatives. If you look at Kenya, levels of economic development in different parts of the country are directly related to the density of co-operatives in those areas.

 Such organisations provide members with insurance, saving opportunities, and the benefits that come from the pooling of resources. They also give their members a voice. Politicians and policy makers are more likely to listen to a farmers’ co-operative than an individual small-scale farmer.

These are important lessons that should inform the implementation of the Uwezo Fund.  An aggressive drive for co-operative development in parts of the country that have lagged behind on this front is long overdue. Helping our youth appreciate the importance of being in organised groups will enable them better address the challenges they face. The government could then encourage national umbrella co-operatives based on line of work.

This will have the added benefit of bringing together Kenyans of different backgrounds for the purpose of achieving economic benefit. And as you would expect, it will be yet another blow against our collective national bad habit of ethnic isolationism.

The government must also try to learn from the fund and tinker with its implementation as much as possible. Designing and effectively implementing government policy is as much an art as it is a science. Throughout the process policy makers have to recalibrate parts of government programmes to respond to unanticipated events or unintended consequences of government policy.

This is something that as a country we have historically been very bad at. There is often very little evidence of an effective feedback loop between policy design and its implementation. Impact evaluation is still alien to most government departments.

Uwezo Fund can be used as a learning experience for the government and private financiers alike on how to boost micro-enterprises help them grow into small and medium enterprises. In much of the developed world privately run small and medium companies provide the bulk of employment – the most illustrious example being Germany’s export oriented Mittelstands.

These types of firms often need financial and advisory services. It would therefore be wise for the government to liaise with business leaders and financial service firms to provide these services to the youth, either for free or in exchange for tax incentives. As I have reiterated on these pages before, the goal should be to create employment for youth. And to do that we need to build thousands of firms that can sustainably create 8-to-5 jobs.

All this to say that the Uwezo Fund is a great idea that has an even greater potential. If managed correctly it will open up opportunities for a lasting transformation of our economy. Needless to say, for this to happen there has to be a deliberate government effort to make the most of the fund, in terms of efficient allocation of money to deserving groups (a tall order, given the type of politics we practice) and effective use of lessons learned from the programme for the purposes of future policy development.

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