Finance Minister, Maria Kiwanuka has this Wednesday announced that the government has agreed with three Commercial Banks to fix the interest rate charged on youth money at 15 per cent for a period of six months.
Ms Kiwanuka said this at the Ministry Headquarters where she officially signed the Memorandum of Understanding with Centenary Bank, dfcu and Stanbic managers in a partnership deal that potentially paves way for the unemployed youth to access the Shs25billion in the 2011/12 budget.
“We have fixed the interest rate at 15 per cent to make the venture capital fund accessible for the youth,” Ms Kiwanuka said. “We have signed the MoU with banks and before the end of this week the youth can access this money from the three banks. The interest rate will remain unchanged until July this year when we shall sit with the banks and review the market conditions.”
Explaining the eligibility criteria, the Minister said the loan will be available for only first time borrowers with a minimum O’level qualification. The Minister said the money will be paid back within four years with a grace period of one year. Individuals with registered business between 18-30 years old can borrow up to Shs5million and up to Shs25million for companies with at least five eligible shareholders.
In the 2011/12 Budget, the government announced the Youth Entrepreneurship Venture Capital Funds to help the jobless youth. However, halfway into the financial year, the youth have not yet received the money- prompting some youth representatives in Parliament to threaten a naked demo.
While there were reports that the government was not contributing any money to the venture Capital Fund, the Deputy Secretary to the Treasury Keith Muhakanizi said: “The money from the Kfw is government money. This money was a grant from Germany paid to microfinance institutions in the country and they paid back the money to government. We are contributing Shs12.5billion and another Shs12.5billion is coming from the Commercial banks.”
For those who want to borrow Shs5million, they must deposit at least Shs500,000 to show that they are serious. Borrowers will also be charged 1 per cent of the principal amount and they must present at least two reputable guarantors. The minister further warned the youth that, “This money is not going for consumption; it is for helping the youth to create jobs and leave a productive life.”
However, the Minister has warned the borrowers against default, adding that the viability of the project will inform the future government decision on whether it’s necessary to put more money in a scheme that largely seeks to help the unemployed youth in the country. “The longest journey starts with the first step and this money must be borrowed and returned for other young entrepreneurs to benefit,” Ms Kiwanuka said.
The Stanbic Bank Managing Director Philip Odera said whoever wishes to borrow this money must present a proposal with commercial merit. “We need something viable before we give you the money. It is in our interest that this money is paid back. This is not a grant, it is a loan.” The Managing Director dfcu Bank, Juma Kisaame and Centenary Bank Managing Director Fabian Kasi were also present.