Is Ruto's Nyota fund another experiment on hustlers?

Economists and trade analysts have raised questions about the impact that the Sh5 billion National Youth Opportunities Towards Advancement (Nyota) programme will create in empowering new sustainable businesses for the youth.

The Nyota Project is aimed at giving youth across Kenya an opportunity to benefit from business support. Successful applicants can benefit from business skills training, business mentorship and capital to start or expand their enterprises.

The government had already rolled out the multi-billion Hustler and Youth Funds to empower young entrepreneurs get sustainable income. According to available data, the objective has, however, so far not been realised.

Critics have also argued that World Bank Nyota project, appears to be a duplication of the Hustler and Youth Empowerment funds, whose effect is also so far minimal. The government, however, argues that they are completely different programmes.

The Nyota Project, financed by the World Bank and spearheaded by the State Department for Youth Affairs and the Creative Economy, targets young people aged 18 to 29 years, and up to 35 years for persons with disabilities.

It also focuses on youth with up to secondary-level education who are underemployed or face systemic barriers to opportunities.

The government says over one million applications have already been received for the business support intervention, which will provide 70 young entrepreneurs in every ward or 100,000 in total countrywide, with Sh50,000 each as start-up capital or for businesses expansion.

During the launch, President Ruto announced that the first cohort of 54,000 beneficiaries were expected to have received their grants at beginning September of last month.

Organic growth

Economist and University of Nairobi lecturer XN Iraki, however, cautions that the success rate of starting a business with a grant like Hustler or Nyota funds is much lower than when one starts a business using borrowed money or loans.

“When you are going to borrow money, you have a business plan, you know exactly what you want to do, you know the risks, and probably you have the skills and maybe partners, unlike when you are just taking money because it is available”,” says Prof Iraki.

He argues that businesses that grow organically usually tend to succeed more than those with granted capital because traders go through learning curves, correcting mistakes and taking risks.

On Saturday, Kiharu MP Ndindi Nyoro and Youth Affairs Principal Secretary Elijah Mwangi disagreed in a public over Nyota fund’s viability.

At a function in Murang’a county, the MP asked the government to consider matching the Sh5 billion World Bank Nyota grant for each youth to get Sh100,000, up from the Sh50,000 they have been promised so that the money can have meaningful impact.

Ndindi urged the government to redirect its energies on rebuilding the economy instead of focusing on politics. He also warned that continued borrowing will hurt future generations.

“We can’t empower the youth with borrowed money that ends up being misused. Kenya’s economy is bleeding and requires re-building,” he said.

But PS emphasised on the importance of the Nyota programme, saying 70 youths in each of the wards in the county will be credited with Sh50,000 sourced from the World Bank.

Mwangi defended government borrowing, saying stadiums are under construction in each county and they are also establishing academies that will promote sports in all regions.

Mwangi claimed that Nyota targets to recruit 2,450 youth from across the 35 wards in Murang’a alone taking into consideration the gender numbers.

Chiefs and county assembly members are expected to help identify eligible youth who will be assisted in the application process to start businesses. He also pleaded with the church, and opinion leaders in the villages to encourage the youth to apply and start businesses.

The World Bank has different empowerment programmes in other countries in Africa. In Rwanda, there is the Priority Risks for Growth and Youth Empowerment (PSGYE) which aims to improve the employability of over 200,000 young people.

Knee-jerk reaction

In Kenya, President Ruto says, 90,000 youth will be trained to gain job experience, 20,000 on recognition of prior learning and another 600,000 on access to Affirmative Government Procurement Opportunities (AGPO).

“We are not just creating jobs; we are building future employers and long-term wealth creators for our nation,” he said.

Another Nyota project critic, advocate Harrison Kinyanjui, describes it as a dearth of ideas and a knee-jerk reaction.

“It won’t provide a long-term solution for the youth. How do you handpick 70 people from hundreds in each ward, give each Sh50,000, and claim to have empowered and inspired them or sparked entrepreneurship? This is myopic, it lacks leadership and vision,” said Kinyajui on a TV talk show.

He urged Ruto’s administration to copy the China model, where giant state corporations, like China Road and Bridge Construction (CRBC) company, create jobs for young engineers and IT experts both at home and abroad.

There is a growing perception also, that the latest fund is another political campaign inducement agenda for votes in the run up to the 2027 elections.

Former Chief Justice David Maraga also argues that the money being thrown around belongs to tax payers, yet they are being told it is for their empowerment.

“Those who have stolen the money from you are bringing it back to hoodwink you that they care for your well being. There is nothing of the sort,” Maraga told a town hall meeting in Kirinyaga.

The funds have been described by some political pundits as disguised bribery schemes of voters by the government in the name of development, because they lack accountability and also duplicate roles covered by other semi-autonomous agencies.

The Hustler and Nyota funds are both run by the trade, SME and finance ministries and focus on youth aged between 18 and 35 years.

Political tool

The Youth Fund was also established in June 2006 through Legal Notice No. 167 of 2006, and was then transformed into a State Corporation under the State Corporations Act on May 11, 2007 to address youth unemployment starting with an initial seed capital of about Sh1 billion.

But in the financial year starting July 2024, under President Ruto, The National Treasury’s allocation to Youth Fund was Sh225 million, a reduction of 55 per cent from the previous year’s Sh500.08 million.

A report launched in August by the Kenya Human Rights Commission described the Hustler Fund as more of a political tool than a financial solution.

The report, titled “Failing the Hustlers,” concluded that the Hustler Fund was structurally unsound, economically unsustainable and politically manipulated.

Launched in November 2022, Hustler Fund has disbursed Sh65.7 billion in loans to approximately 26 million Kenyans, with the default rate standing at 68.3 per cent.

The KHRC calculated that for every Sh500 disbursed, Sh340 is effectively lost, a figure that was disputed by MSMEs PS Susan Mang’eni.

“This is not financial empowerment. It is a loss-making scheme disguised as progress,” the KHRC said in the report adding that, “Some reasons for the high default rate include the loans being used for consumption rather than income-generating purposes and structural deficiencies in the fund itself.”

The government has already announced that millions of Kenyans will miss out on Nyota funds over unpaid Hustler loans as the government struggles to recover more than Sh7 billion from 13 million defaulters.