Why Aren’t Kenya’s Affirmative Action Funds Working?

A recent study by TISA delves into the reasons why Kenya’s funds for marginalized groups aren’t working as well as they should. 

In late March 2016, the fourth chairman of the Youth Enterprise Fund resigned. Bruce Odhiambo had found himself in the middle of increasing calls for resignation and prosecution. 180 million shillings had been transferred from the Fund’s account at Chase Bank to the bank account of Quorandum Limited at Standard Chartered.

The instructions to move the money came from the CEO, Catherine Namuye, on February 11 2015. What was suspicious about this first transaction was that Namuye was the sole signatory of that particular fund account, but Odhiambo later co-wrote a letter to the bank explaining the situation.

With that, 49 million shillings moved from the Fund account to a Quorandum bank account at Standard Chartered that had been dormant since it was opened in 2002. From a deficit of 11 thousand shillings, its balance shot up to nearly 50 million, which was then systematically transferred or withdrawn. Quorandum then paid 3.3 million shillings to Bruce Odhiambo’s personal account at Cooperative. The payment, they said, was for “supply and consultancy services.”

When the scandal finally broke out in early 2016, it became clear that the Youth Fund, and in fact all of Kenya’s affirmative action funds, had been ailing for a while. Their performance has always been dismal, even without the headlines. Now, a new study by The Institute of Social Accountability shows that one of the reasons is that mega-corruption trickles all the way down to applications. 13 percent of respondents for the Youth Fund and 15 percent for the Women Fund confessed to having been asked for bribes while applying for loans. Given that two thirds of all the respondents didn’t feel that the process is free and fair at all, it’s possible a larger proportion actually paid bribes to be considered.

Kenya launched three affirmative action funds under the social pillar of its ambitious Vision 2030: Youth Fund, Women Fund and Uwezo Fund. Each was designed to target specific marginalized groups and provide them with interest-free capital. For public funds, the proportion of people who felt they were accountable is precariously low. The funds remain cryptic organisations whose structures are unknown to beneficiaries. Applicants don’t know how the funds run, or even about the existence of vetting committees that process the applications. This is most visible among Uwezo Fund respondents at 81 percent, and 73 percent for the Youth Fund.

Public participation is a key aspect of social accountability, especially in areas of governance and development. It means that if the beneficiaries do not participate in the management of the funds, they can’t provide crucial input in how they run, and evolve. Several audits over the years have found instances of irregular procurement within the major funds. The issues in these audits are hardly ever addressed unless they become headline scandals like the Bruce Odhiambo one. 

The Jipeshughuli study also focused on how respondents learnt about the application requirements and process, and the many hindrances that limit their access to the funds. The most common source of knowledge of the funds came from fund officials, word of mouth, and media. The Women Fund scores highly here and its flexibility and success might partially because the constituency fund officials have monthly targets to meet. Among the three funds, Uwezo Fund is the least performing, at least in accessibility. 58 percent of respondents in Uwezo were not aware of efforts by the fund’s officials to publicize it.

Even with this information, applicants then have to face the basic requirements of application process. Currently, most of the funds’ products are only accessible to group applicants. The group requirement means that the amounts offered under each fund are insufficient to build substantial businesses without further outside funding. It also limits the kinds of business ideas presented, resulting in duplicity of ventures, a key problem within the Funds, especially Women Fund.

Ideally individuals can apply for the Youth Fund, but they are required to provide security in the form of logbooks, for example, which limits their eligibility. The amounts they can get are also higher than for group applicants, which makes the products attractive to individual entrepreneurs but not quite accessible. The fund estimates that it created 300, 000 jobs in 157, 000 enterprises. While this is significant, young Kenyans make up two thirds of the unemployed. It also means that each enterprise employed an average of 2 people only.

The funds have not found a way to involve their target markets in the design of fund products. Since Uwezo, for example, has not been delinked from the Constituency Development Fund (CDF), its representatives are handpicked by legislators. The political clientelism that results from this means that officials on the ground have too much power, and the funds could become ways to get political mileage among target groups. Established in September 2013, Uwezo is the youngest of the funds. It has a less specific target group as is designed to provide funding for women, youth, and persons living with disability groups at the constituency level.

When asked how they thought the funds could reduce corruption in the Youth Fund, 23 percent of respondents said including beneficiaries in management would be the way to go. Beneficiaries have a stake in the health of the fund, which enhances how they view their role in ensuring transparency and effective monitoring. More respondents, 39 percent and 24 percent, said that enhancing transparency and regular monitoring respectively would get the job done. The proportions were almost identical for the other two funds, indicating that the issues affecting them are somewhat similar, as would be the base solutions.

A decade in, Kenya’s affirmative action funds are still not operating at their optimum. The Jipeshughuli report recommends rethinking them from the ground up, to rectify these structural impediments to access, transparency and accountability. Other issues, such as higher penalties for government officials who engage in corruption, also need to be dealt with as part of rebuilding public trust in the funds.

Owaahh, 2017.

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