The politics of youth loans

Caught in the storm of loan defaulting, with K1.6 billion (about $4m) already loaned out in four years of its operation, is Yedef achieving its objectives of youth development? EPHRAIM NYONDO raises the debate.

According to its concept paper, the Youth Enterprise Development Fund (Yedef) was Bingu wa Mutharika’s administration wish, not just to provide the youth with sustainable technical, entrepreneurial and financial skills, but to prepare them to operate commercial ventures in an effective and efficient manner.

The aim was for the youth to harness these skills towards achieving business continuity, growth and profitability.

One of the beneficiaries of the programme, John Mwalabu, runs a carpentry shop about a kilometre away from Bvumbwe Market in Thyolo.

A Teveta carpentry graduate, Mwalabu opened a small workshop in his village where he made some woodwork such as chairs, tables and doors. However, having started with a small capital, the production was low.

“It was just about survival, not success. I would make a single chair, sell it; use part of the cash at home, and the remaining to buy planks,” he says.

Then he got a K120 000 loan from Yedef.

“It was a big boost to my business,” he confirms: “It helped me increase production. I now make more profit.”

Mwalabu, who is married with two children, lives in a three bed-roomed house, with corrugated iron sheets.

“I have never defaulted payment of my loan,” he claims: “I know it is a revolving fund. It is meant to help me and others too.”

To him, the programme is a success.

But not everybody who benefited from the programme has a similar story.

There is a different story from Mpemba, Blantyre, where four boys who, after benefiting from Yedef, failed to pursue their piggery business, shared the money and disbanded.

One of the group’s members, a 26-year-old who asked for anonymity, says the four, initially, did not have a plan to develop a business plan and ask for a loan.

“We were tipped by a relation to register for the loan facility,” he says.

He adds they did not have the requisite skill in piggery business plan they presented; it was just quickly hatched in order to access the funds.

Mwalabu’s story and that of the four boys reveal Yedef’s two faces—faces that raise the question of the programme’s effectiveness.

By last year, the programme was trading in deep stormy waters. So stormy it was that a month after coming to office, the Joyce Banda administration suspended it.

“We have discovered that there have been many defaulters and several other irregularities, so we are temporarily stopping the disbursement,” Minister of Sports and Youth Enoch Chihana told the media at the time.

Relaunched in September, four months after the suspension, Alex Mseka, principal secretary in the Ministry of Sports and Youth, told the media that government had recovered some loans.

“For the past months, we have registered a 40 percent repayment rate and it is coming up to 50 percent. Previously, it was at 17 percent which was not helpful at all because this is a revolving fund,” Mseka said.

However, current statistics sourced from the ministry are not impressive. With K1.6 billion (about $4m) already disbursed since 2009, the repayment rate currently, according to Hillary Jalafi, Yedef’s head of operations, stands at 62 percent.

“Defaulting is our biggest challenge,” says Jalafi.

But what could be the heart of loan defaulting?

Jalafi says the general performance of the economy, more especially the last two years when Malawi registered poor tobacco marketing seasons greatly affected repayments of the loans. He adds that being a government loan fund, the facility attracted political interests and because of this, some loan beneficiaries who were politically mobilised or in some way had political connections, deliberately defaulted on the repayments.

“I have a strong belief that with the expected good tobacco season, we may have an improvement in loan repayments,” he says.

But Weston Msowoya, a youth activist with the Malawi Human Rights Youth Network (MHRYN), does not share Jalafi’s optimism. He argues that the programme is a ‘total mess’.

“The real problem lies in how it was formulated. With a lack of a concrete policy and legislation on youth development behind it, the programme only emerged as a political tool. No wonder some politicians clearly said that only their party followers should benefit,” he says.

He adds that the process of disbursement is all flawed and that is why it is difficult to recover the loans.

“We have evidence of people who are not even youths, are accessing these funds. The vulnerable youths are not accessing these funds,” he argues.

Last year, Weekend Nation carried an investigative story that revealed how Democratic Progressive Party (DPP) director of youth Lewis Ngalande used three students to access about K2 million (about $5 000) loans from Yedef, a development described by the funds director, Harrison Mandindi, as illegal.

In fact, even a survey by Youth Net Counselling (Yoneco) in Rumphi in January last year revealed that most youths that accessed loans through members of Parliament fail to pay back.

Beyond that, Msowoya’s greatest concern is that although the programme was re-launched in September last, the framework of running it has not changed at all.

“We are still observing the same old tendencies of prioritising party members in the disbursement of loans. This is worrying. A lot of money continues to go where it is not supposed to go,” he says.

But Jalafi believes the programme is working well, judging by the “huge demand for loans which we are not able to meet”.

Surely, the future of the programme rest not just on reviewing its framework as advanced by Msowoya, but most importantly, learning from beneficiaries like Mwalabu.

“Yedef is a well-thought-out programme that is intended to benefit the youth of Malawi and reduce poverty. I want to call upon all those that have outstanding loan balances to quickly repay the loans. My assurance to those that are going to repay quickly is that Yedef will give them repeat loans as per our lending policies,” appeals Jalafi.