GOVERNMENT is working on a new model for the Youth Fund to reduce the defaulting rate and encourage payoff by current defaulters, NewsDay has learnt.
This development follows the temporary suspension of the Youth Fund by government. The suspended fund, which targets youths between 18 and 35 years, had underperformed with a loan default rate of 78%.
A subsidiary of Old Mutual, CABS, is the disbursing agent of the $10 million Youth Fund which the parent firm availed as part of its compliance with the indigenisation and empowerment laws.
The fund was launched two years ago.
CABS acting managing director Simon Hammond said a temporary freeze of the facility was instituted by the trustees of the Youth Fund to allow the finalisation of a new model that is less risky and reduces the default rates.
“There are increased collection efforts underway and defaulting youths will be subjected to litigation as is the norm in the recoveries process. The new model that is being designed for the Youth Fund will incorporate strategies to reduce the defaulter rate and encourage payoff by current defaulters,” Hammond said.
To date, the total number of approved beneficiaries for the Youth Fund are 3 601 with an approved amount of $5 179 708 and of the approved amount, $4 925 173 was disbursed with an average loan size of $1 438.
Hammond said measures were being taken to recover some of the money.
The then Minister of Indigenisation and Youth Empowerment Francis Nhema had previously said CABS would resume disbursements, but with recommendations that beneficiaries would need collateral or a guarantor to avoid a repeat of the high default rate by youths that prompted its suspension.
Nhema said that in an effort to recover the loans advanced to youths by CABS, the ministry has asked the various provincial officers to follow up on the loans. In some cases, Nhema revealed, they had rescheduled the loans and in other cases had asked parents of the defaulters to help them recoup money.