Radar | Sep 10,2023
The 26-year-old Zena Tekeste graduated in theatrical arts in 20017 from Wegagen Film & Theatrical Art College with the ambition of becoming an actor. However, the reality he faced in the entertainment industry after his graduation was different, since he has been unable to secure a job for the past two years.
"The industry requires, name and reputation," Zena told Fortune.
Then he decided to make ends meet working as a barber, relying on side training he took earlier in his life. Being hired at barber shops, he worked as a barber for a year and a half.
Some months back, he started thinking of having his own barbershop and went to Wereda 03, located in Kirkos District, to get support in any way he could. The weredaofficials assured him that they would be providing him with a working space.
After four months of paperwork and procedures, he was finally awarded a shed near Goterra Condominium. Even after starting his own business, Zena was dissatisfied with the location of his barbershop.
"It was very far from the main road," said Zena. "Thus, I was hardly getting any customers."
After a couple of months, he closed down his business and returned the working space to the weredaadministration.
The business left him at a loss and in debt, he told Fortune.
Last month he heard that new loans are being given out to youths by the City Administration. He wanted to give the Administration’s unemployment schemes one more chance to see if his luck would change.
He met up with two friends with backgrounds in civil engineering to team up for a new business venture of opening a construction material retail shop.
Since the loan disbursement began a month and a half ago, 250 million Br has been given out to 832 enterprises.
Then they decided to apply for a 350,000 Br loan from the scheme, which has recently become popular in the city.
Last March the Addis Abeba City Administration Council approved two billion Birr for the Youth Revolving Fund, intending to create job opportunities for the city’s unemployed youth between the ages of 18 and 34.
In approving the Fund, the officials of the City Administration stated that there is an immediate need to create job opportunities and alleviate the economic and social problems of the youth through engagement in income-generating activities.
Addis Abeba has about 700,000 unemployed people, about a quarter of the city's population, while there are 11 million unemployed people in the country.
The Fund, which is expected to be fully disbursed before mid-October, is administered by Addis Credit & Savings Institution S.C, a microfinance institution operating primarily in the capital.
The fund has lax requirements, since it provides loans to organised groups through personal guarantees with no collateral. They only need a TIN, business license registration and memorandum of association along with project proposals.
The scheme, which gives as high as two million Birr in loans, prioritises manufacturing, urban agriculture, construction, services, trade and entrepreneurship.
At the weredalevel, loan requests of up to 300,000 Br can be approved, while higher amounts have to go for district approvals.
Thus, Zena and his friends were at the weredaoffice last week to process the first steps to get a loan for their planned construction material shop.
Zena joined 100 youth that have applied to get loans from Wereda 03 of Kirkos District. So far, the Wereda has disbursed close to two million Br to five youth groups, and three more are in the final stages.
In the process of loan approval, the officials at the weredasand districts review the feasibility of the proposal, the market availability of its inputs, and how many additional jobs the proposed project will create.
"We also conduct a behavioural assessment of the beneficiary and inquire about their due diligence from his family and neighbourhood," Lemesa Negari, deputy execution and job creation and enterprise special office head at Wereda 03, Kirkos District.
So far, the City Administration has disbursed 12.5pc of the allocated two billion Birr for 832 enterprises that comprise 4,800 youth since disbursement began a month and a half ago.
Allocating a revolving fund for youth is not new. Two years ago parliament approved a 10 billion Br fund allocated to 2.9 million unemployed youth. Managed by the then Ministry of Youth & Sports, the fund was disbursed through the Commercial Bank of Ethiopia.
The Ministry of Finance has prepared the allocation of the fund to the regional states based on the size of their youth populations.
Early last week, Prime Minister Abiy Ahmed (PhD) disclosed that two million workers are joining the economy yearly, while the economy opens jobs only for half of them.
During the fiscal year, 1.4 million jobs were created out of the planned three million jobs. The jobs were created through mega projects and small and medium enterprise schemes such as the revolving fund.
Out of the 10 billion Br revolving fund, Addis Abeba got 418 million Br, and as of April 2019, the sum was disbursed to 17,000 youth organised under 2,116 enterprises.
So far, 158 million Br of the loan has been repaid out of 169 million Br outstanding, a default figure of 11 million Br.
“Defaulting in loans is common in business,” said Mesfin Futuema, marketing and business development head at Addis Credit & Savings. “Sometimes the assumed market factors in the business plan change or were wrong, which lead to the incurring of losses."
There are also some businesses that disappeared without paying their loans. In Wereda 03 of Kirokos District, two enterprises that took a total of 300,000 Br closed the enterprise and the Wereda's administration was not able to track them down.
Mesfin argues that such cases are sporadic and should not distort the whole image. He also says that requiring the youth, who don’t have a job or other resources, to provide collateral as a prerequisite for loans is not realistic.
Mikiyas Kebede, deputy manager of Mikiyas Kebede and his friends at Electrical Installation Plc, supports Mesfin's idea.
"If we had collateral, why would we need to seek seed money for our business?” he said.
Mikiyas's company took half a million Birr from the revolving fund in two rounds and fully serviced the value so far. Now, they have started the process of getting one million Birr under the latest scheme. This time Addis Credit & Savings seem serious about defaulters.
"If it becomes necessary to get back the money, we will sue them," says Serkbirhan Zeraye, deputy managing director at Addis Credit & Savings.
Eleni Gabre-Madhin (PhD), the founder and chief happiness officer of Bluemoon Ethiopia's first youth agribusiness incubator and seed investment platform, argues that the structure of the fund should be administered in a way that brings the desired result.
"The way the revolving fund is set up is not commercially oriented, privately led and professionally mannered," Eleni, who supports the initiative of assisting the youth financially, told Fortune.
Eleni recommends setting up a private fund manager to administer the loan portfolio in a way that could be leveraged by other private investors.
"Involving the private sector will bring the additional benefits of market knowledge, management and mentorship to the enterprises," Eleni said.
But for youth like Zena, who are frustrated with being unemployed, rushing to secure the loan before the funding scheme is phased out is their only goal.
PUBLISHED ON
Jul 09,2019 [ VOL
20 , NO
1002]
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