Needed: Better management of entrepreneurship funds
 
2008-07-19 09:11:33
By Editor

During the on-going visit in Tanga Region to inspect and initiate development projects, President Jakaya Kikwete made an important observation about the 21 billion shillings `JK Fund` which was set aside in 2006 to be loaned to small and micro-enterprises in a bid to create entrepreneurs and self employment.

The fund was channeled through CRDB Bank and National Microfinance Bank (NMB).

The President observed that some unscrupulous businessmen through SACCOS took the opportunity to take the loans not to invest but to buy personal cars and this defeated the intention of establishing the fund.

In other cases, he observed the targeted group did not receive the loans but the money went to smart businessmen who had connections with officials of the said banks.

It was further observed that very few rural businessmen got access to these loans and the major beneficiaries were urban entrepreneurs.

There were lengthy and cumbersome procedures which made it difficult for ordinary people to apply for loans and they were thus unable to secure the funds to start new businesses or expand existing ones.

There are number of lessons to be leant. There is a need for adequate preparation and extensive public education for both urban and rural people so that they understand that such funds are intended for developing small and micro enterprises.

Another lesson is that the banks should have the capacity to carry out the administration of such funds which is an additional burden over and above their day to day activities.

In the case of `JK Fund` both NMB and CRDB set only a few days to deal with the disbursement or evaluation of the proposals submitted by the intended borrowers.

As President Jakaya Kikwete noted, there is a need to evaluate if the fund was successful in achieving its objectives before another phase is launched.

There is a need to learn from past mistakes. There were allocations from the budget in the first and second phase for youth and women but these were not administered by banks and instead did not benefit the poor but a few leaders.

It is proposed to start an economic empowerment fund—Mwananchi Fund—that will implement the empowerment policy.

It is encouraging that the National Economic Empowerment Council has started with sensitisation of people in all the districts in the country.

Other similar funds need to do the same before they are launched.

In the final analysis, the borrowers need to be given entrepreneurship education first so that they can use the loans for intended goals and repay the money so that others can also borrow.

It is good to institutionalise the administration of funds like the National Entrepreneurship Development Fund (NEDF) under SIDO which has been a major success.

This is because constant evaluation and monitoring of the funds is required so that they can meet the intended goals and become sustainable.

• SOURCE: Guardian