MONEY-FESTOS WITH FREE LOANS PROMISE OUT OF POINT

Snippets

• Presidential candidates promising free loans or money to jobless youth
• Every town is abuzz with street-vendors so…
• Most people doing small business consider themselves jobless
• Industrialization is the way out..

A promise we keep on getting from the top candidates in the presidential race is that they will give grants and soft, interest-free loans to all jobless youths.  There is no doubt that this is a noble idea.  There is also no doubt that this is given in good faith.  The only question is whether it would be wise, whether that approach can really solve our unemployment and poverty problems.

Our country is already saturated with small businesses.  In rural areas, nearly every home has its own “shop”, operated by a family member.  In towns, every other plot has a shop, operated by a resident.  Every bus stop has a bunch of motorcycles competing for the passengers – soon the motorcyclists will outnumber the passengers.  Almost every space that can be occupied by a business is occupied.  So, how are the business that will be established using the aforementioned grants be accommodated?  And if everybody has his or her own business, who will be whose customer?  Who will be working as employees in the business?

Although we may want to take the easy way out, the only way to improve livelihoods in this country is by setting up industries.  We cannot be a nation of shopkeepers.  In any event, not everybody can be an entrepreneur.  Very few actually have what it takes.  Most of the jobless are the people who have previously tried their hands at various businesses, without success.  Indeed, over 95 per cent of all small businesses failing within a short while.

You talk to Kenyans, including those running these small enterprises, and you learn that most of them would be glad to get jobs.  They actually consider themselves jobless.  They
are doing the businesses out of desperation.  Even if you give people the capital being promised, they will still claim to be unemployed.  And you will still have the joblessness problem to deal with at some point.

As things stand, thanks to micro-finance institutions – which are not as stringent as banks in lending – capital is really no longer an issue for people keen on setting up businesses.  In any case, only people who are likely to succeed in business, should get to borrow.  Commercial lenders have ways of gauging the probability of success.

This money for interest free loans for businesses which will probably fail should instead be used to spur industrialization.  Let’s do the math.  If we establish 2,000 factories, each employing 600 people, that would be over a million mark, high quality jobs per year with ripple effects.  Some Ksh. 100 million can establish one factory.  Thus to establish 2,000 such factories we only need Ksh. 200 billion which we can marshal, remembering that our annual budget is over a trillion.