Kiama Irene Muthoni

Youth unemployment is a major issue in Kenya. The Kenyan unemployment rate is approximately 40% and out of this figure, it is estimated that 64% are youth. Microenterprises have been seen as the solution to the youth unemployment crisis and that is why encouraging their growth has been made an industrial policy in Kenya. In order to start the microenterprises, the youth need access to credit and it is even more critical to design credit programs that are tailored to meet their various needs. Findings from youth development programs show that finance is a major hindrance to the success of youth at self-employment. The main constraints to youth accessing credit are lack of personal savings and resources, not qualifying for mainstream financial institution loans and lack of successful micro lending funding. These shortcomings make it difficult for young adults to receive the capital that they require to start microenterprises. Most youth turn to family and friends for support but in many cases the money raised is not enough to launch microenterprises that have a capacity to grow. Other informal sources of funds are money lenders and suppliers.

 However, money lenders charge high interest rates and suppliers may provide terms that are mostly not suitable to the borrowers. The implementation of a micro lending program that is accessible and that caters for the youth is the solution to the problem of lack of access to finance by the youth. Thus the purpose of this study was to establish whether the microfinance credit delivery models utilized by the microfinance institutions help the youth microenterprises to grow. The objective of the study was to establish the effects which group dynamics, voluntary savings and training had on youth microenterprise growth. The study was both descriptive and explanatory in nature. The target population was 1,215 SMEP DTM clients that were between the ages of 18 and 35 years, and who owned micro enterprises in Kayole in Nairobi East District. A sample of 110 respondents was selected using a stratified random sampling technique. The researcher administered questionnaires to the selected sample in order to acquire the primary data. Descriptive and inferential statistics, with the aid of Statistical Package for Social Sciences (SPSS), were used to analyze the data. The inferential statistic used was regression analysis. This analyzed data was then presented in form of tables.

The findings of the research showed that majority of the microenterprises felt that servicing loans on individual basis was easier as compared to servicing loans taken in a group setting. This showed that both individual and group-based lending approaches can affect business growth but the type of business was also a major determinant on which model was best. Voluntary savings were found to have a major impact on the growth of youth microenterprises since the accumulated savings helped in servicing loans and improving the capacities of the micro enterprises. The study also showed that most of the respondents were moderately satisfied in relation to SMEP DTM credit services in meeting personal training and business skills. It was noted that training helped the youth micro enterprises to run better and build a position where they were operated with increased profitability and growth.

Recommendations were made that in order to satisfy its’ youth micro entrepreneurs, microfinance institutions need to develop products that are tailored to individual situations and needs of the various youth microenterprises. It was also recommended that voluntary savings should be encouraged by MFIs and should be tailored in a way to suit the needs of the various youth microenterprises. The study also recommended that there was also need for a continuous training to assist in utilizing the loan obtained from SMEP DTM. In addition, MFIs need to partner with microenterprises and have continuous series of courses that would ensure proper business management and proper and timely servicing of loans. The recommendations for further studies were that a wider scope on the entire country needed be considered to get varied opinions.