Kenyan Government offers youth Sh200m in local purchase orders financing

The Government has set aside a Sh200 million revolving fund this financial year that youth bidding for public sector tenders can access.

Through the Youth Enterprise Development Fund (YEDF), the Government is offering financing for bid bonds and local purchase orders (LPOs).

In an interview last week, YEDF’s Chief Executive , Catherine Namuye, said individuals, registered groups and youth-run firms can access loans from the revolving fund.

Trade finance

The fund was initiated in response to the financing challenges the youth face when they win bids for Government tenders.

Since July, the fund has disbursed more than Sh50 million to 161 youth-run enterprises, a majority of which are from Nairobi County.

The concept, Ms Namuye said, would soon be rolled out to other counties.

She added that the introduction of trade finance products is part of the Government’s Affirmative Access to Government Procurement Opportunities Programme (AGPO), which targets youth, women and persons living with disabilities.

“To date, YEDF has procured goods and services worth Sh90 million from these target groups, thus accelerating the growth of their enterprises,” said Namuye.

She added that youth who win Government tenders can access bid bonds and LPO financing of up to Sh20 million.

An LPO is a commercial document issued by a buyer to a seller, indicating the products to be supplied, their quantities and the prices agreed on.

A bid bond, on the other hand, is a guarantee that a seller has the capability to take on and implement a project or supply goods once selected during a bidding process.

“This concept is good as it allows us to undertake financial activities we would otherwise be unable to,” said one of the beneficiaries of the fund, Ann Mumbi, the proprietor of Beullah Company.

Approved loans

According to Namuye, since July, the fund has disbursed and approved LPO loans worth Sh28 million to 71 youth-owned enterprises, and issued bid bonds worth Sh25 million to 90 enterprises.

Under the LPO financing loan, entrepreneurs will be financed up to a maximum of 70 per cent of the total amount required.

The loans attract an interest rate of 1.5 per cent per month, with applicants charged a processing fee of 2 per cent of the amount received.

For the youth to benefit from the financing initiative, they must be registered with the relevant Government agencies.

Their companies, groups or partnerships must also have at least 70 per cent of the registered members aged between 18 and 34.

The applicants will also need a letter from the procuring entity indicating that it will pay LPO proceeds in favour of YEDF.

Additionally, limited companies will need to present a sealed resolution to borrow and indicate the amount, purpose, payment period and security offered. The asset being offered as security must be valued, with the applicants incurring valuation expenses.

“The concept of trade finance products is noble and will help many young people who cannot execute projects they are bidding for from the Government,” said another beneficiary of the fund, Jared Kabuki Kimsingi, the proprietor of Peach Park Engineering and Construction Company in Kajiado County.

“The fund will also contribute to the growth of local enterprises.”

Routine maintenance

Mr Kimsingi said he won a tender of Sh13 million from the Kenya National Highway Authority (KeNHA) to carry out routine maintenance and repair of sections of the Athi River-Namanga road, but he did not have enough cash.

He applied to YEDF for the whole amount, but got Sh6.5 million; he will source the balance from local banks.

Ricky Alogo of Espouse Enterprises also applied for LPO financing of Sh1.4 million, but got Sh500,000. Mr Alogo, whose company makes branded merchandise, said the revolving fund would help tackle unemployment and poverty.

“The idea is good and gives youth who bid for Government tenders but cannot implement them due to a lack of funds or the inability to go for months without being paid a chance to grow their businesses,” he said.

“The challenge now is for youth groups to ensure they have proper documentation to qualify for the loans.”

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