CABS stops Youth Fund disbursements

Published: 04 July 2014

CABS has suspended disbursement of monies to the Youth Fund due to the high rate of default on re-payments.

CABS managing director Kevin Terry told a Parliamentary Portfolio Committee on Youth, Indigenisation and Empowerment that the financial institution needed to "re-strategise" because it was losing out on money.

"$5 million has been distributed, the other $5 million has been suspended since the end of May because of a re-do strategy by Trustees, a re-evaluation to re-strategise because of loss of money and unpaid loans," said Terry.

According to figures provided by Terry, CABS currently has 3 600 accounts under the Youth Empowerment Fund and $4,2 million of the money disbursed through them is not "performing."

He added that the Youth Fund is not performing well because the youth are not equipped to be business people.

"The Youth fund is not working that well and the problem is youth don’t have the capacity to operate as businesspeople," he said.

The documents supplied by CABS show that as from 20 June this year 78 percent of the loans disbursed under the Youth Empowerment Fund are not performing and keeping up with payments.

Also appearing before the committee was CBZ Bank.

CBZ chief executive Never Nyemudzo said the Government has taken a 100 percent risk of the Special Youth Fund as they contributed $1,8 million towards it.

"The Special fund how it operated was that the Ministry of Youth Development, Indigenisation and Empowerment was taking 100 percent credit risk while with the ordinary fund the Ministry was taking 80 percent credit risk with 20 percent sitting in the bank.

"They brought in seed fund of $400 000 followed by $150 000, over the years this seed fund has grown to about $1,8 million.

A beneficiary would then approach the Ministry offices in their various provinces and districts get approval then come to the bank for disbursement and that is under the special fund," he said.

He said out of the $1,8 million under a million has been disbursed from the Special Youth Fund.

"Over the years out of the $1,8 million we have disbursed about $ 945 thousand with $1,4 million outstanding under the Special Fund with the component of interest. Under the Ordinary Fund we have done $1,3 million in terms of disbursement and about $1 million outstanding" he said.

According to CBZ 55 percent of loans are performing and 45 percent are in default largely in the areas of manufacturing, poultry and in cross border trading.

The bank has a total of 1 859 beneficiaries under the Youth Empowerment Fund.
- BH24

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