Youth Fund: Gulu’s tale of success and despair

Billy Ogaba has been running a pork joint and a washing bay in Gulu town for the last four years.
Born in Bungatira village in Aswa sub-county, Ogaba dropped out of school in primary six, as the Lord’s Resistance Army insurgency ravaged Acholi and confined an entire population into displacement camps.

“I had to be very creative to survive,” says Ogaba, 26.

Creativity led him to start Gulu Town View pork joint and, later, a washing bay. Prior to the initiatives, Ogaba was occasionally idle, which drove him into gambling. Today, Gulu Town View is one of the most popular pork joints in Gulu town. Today, his pork joint is very popular and, besides giving him a source of livelihood, it employs at least 10 youths. When the government established the Youth Entrepreneurship Capital Venture Fund, Ogaba looked at it as an opportunity to expand his businesses.

“I had feared to get a loan in the banks because of the high interest rates and the many requirements. But when government started the youth fund, I knew it was my time to get a good loan,” he narrates.

The fund was established in partnership with three commercial banks and took effect in the 2011/2012 financial year.

“The youth entrepreneurship venture capital fund will be used to support youth starting or expanding their business enterprises,” said Maria Kiwanuka, the minister of Finance, Planning and Economic Development, in her maiden budget speech.

Accordingly, Shs 25bn was allocated to the fund in the 2011/2012 financial year and an additional Shs 7bn in this financial year, bringing the total amount so far to Shs 32bn. The fund comprises of a grant from the German Development Agency (KfW) (Shs 12.5bn) and an equal contribution of Shs 12.5bn from the participating banks—Development Finance Company of Uganda (dfcu), Centenary bank and Stanbic bank. Ogaba says he immediately inquired about the basic requirements and applied for the loan.

“It is very tiresome and at times a disappointing process. I managed to get all the requirements but the bank refused my security [my motorcycle] because it was old. I had to use my brother’s new motorcycle as security,” he said.

The loan process took eight months, but at last Ogaba was given a Shs 4.5m loan payable in four years, with a grace period of one month. The loan, Ogaba says, has helped him renovate his pork joint to ‘a corporate level’.

“I used part of the money to buy a car washing machine for my washing bay,” he added.

Yet Ogaba is one of the three lucky youths, out of 200 applicants, who have accessed the fund in Gulu. The others are Margaret Lanyero and another unidentified youth, all business people. John Mugisha Anywar, a Gulu district youth councillor, says many youths have become demoralized having spent a lot of money on trainings, opening accounts, acquiring financial cards, and registering enterprises (companies) and transport and yet they have not been considered. He suspects foul play.

“There are many youths who applied and had all the requirements, but they didn’t get the money,” he notes.

“If all the youth who applied for the loans didn’t get them [loans], where has this money gone?” he wonders.

Isaac Ojok, one of the unlucky applicants is still wondering why he was not considered. He says he has struggled unsuccessfully for 18 months to access the loan.  “I got all the requirements the bank asked, but up to now, I have not got the money,” said a visibly distressed Ojok.

Ojok runs a kiosk in Awach trading centre, 15km north of Gulu town, where he deals in general merchandise. Like Ogaba, he wanted to use the loan to expand his business. Yet every time he would make a follow-up with the bank, he would be told to come back next the next day, without any further explanation. After endless trips to the bank without any success, he decided to take a break.

“I don’t have any hope of getting that money. I have given up; instead of wasting a lot of time and money, I am trying to acquire a loan [from] a micro finance institution,” said Ojok.

Unlike other disadvantaged youth, Ojok holds an O-level certificate and was able to get two guarantors, one of them his elder brother, a certificate from Enterprise Uganda and a financial card he processed at Shs 50,000 plus all the recommendations the bank demanded, but he still did not receive the loan.

His story represents the shattered hopes of many youths who had hoped that the loan would turn around their fortunes. It also reflects the plight of thousands across the country, who despite having the requirements, are still unable to access the loans.

Billions spent

A report by the ministry of Finance, Planning and Economic Development (MFPED) to Parliament last June indicates that notwithstanding the challenges in accessing the fund, 2,620 youth/enterprises have so far benefited from the loan scheme. Also, over Shs 9.7bn has been disbursed so far. The report notes that another 1,947 loan applications, calling for Shs 7.4bn, are being processed.

The report says that youth from the central region are the biggest beneficiaries (1,115) followed by western (469), eastern (416) while only 169 youth in northern Uganda have so far got the loans. Over 600 applications had been rejected for lack of adequate information, notes the report. The youth complain that the guidelines for accessing the loan scheme are unfriendly.

For instance, those eligible for funding should be engaged in manufacturing, agro-processing, primary agriculture, fisheries, livestock, health, transport, education, ICT, tourism, construction, printing and service contractors. The youth can access the loan either as individuals or companies. Diana Kahunde, dfcu bank’s marketing and communications manager, explained that the youth fund cash is available but most youths have failed to meet the bank’s requirements.

“Some youth think it is free money from government, and therefore no requirements are needed, yet the participating banks have also made a contribution,” she said.

Mugisha, the youth councillor says some of the requirements, like being in possession of a land title, are stringent.

He queries: “How many youth in Gulu or Amuru have land titles? They don’t even have land. So, such a condition is not friendly to them.”

Joyce Alima, a female district youth councilor in Gulu proposed that the be treated as a special project and be handled through the Chief Administrative officers in the various districts. She adds that the fund should fund should be divided equally among all the districts in Uganda.

The youth also want Parliament to enact an elaborate law, to guide the operations of the fund. They feel that such a law would help them access the loans easily. According to the government report, discussions are underway, to establish an arrangement where sound, safe and sustainable savings and credit cooperatives (Saccos) with good track records would borrow funds from the participating banks on behalf of the youth at the micro level. The report also proposes creating a ‘pool’ facility in Bank of Uganda to receive all venture capital funds to which an interested financial institution can apply for loan funds.

ssekika@observer.ug

This Observer feature is published in partnership with Panos Eastern Africa, with funding from the European Union’s Media for Democratic Governance and Accountability Project .