At the constituencies, Kuti said, eligible youth would access the funds through the Constituency Youth Enterprise Scheme (C-YES).
"This portion of the fund will ensure that youth living in areas that are not well served by financial intermediaries are not disadvantaged in accessing the fund," Kuti said when he briefed the Press on the status of the fund in his office on Monday.
Islamic youth will access the funds through a tailor-made Halaal product (conforms to the religion's principles), the minister said.
Youth groups have up to February 28 to submit business proposals, which will be evaluated by the Divisional Social Development Committee. More than 4,200 groups are expected to apply for the loans. Only youth in the age bracket of 18 and 35 years can get the cash.
To ensure equity in distribution at the districts, the fund has been put into halves, where the first half will be shared equally among the districts and the other dictated by the population in each district.
Beneficiaries of the fund through the C-YES category will enjoy a three-month grace period with full repayment in instalments within 12 months thereafter.
To qualify, a business venture must have been in existence for at least three months before applying for the cash.
President Kibaki is set to launch the fund on Thursday at KICC in Nairobi.
The kitty is packaged to empower the youth through investments in small and medium enterprises as a way of tackling the runaway unemployment in the country.
Defaulters face penalties, but the minister assured the groups will be encouraged, through consistent training, to honour the contract.
"Where repayment is done on time, the constituency will benefit more from the youth fund through increased allocation," Kuti said.
Accessing the loans through the financial institutions will require "flexible collateral" and will attract "mitigated interest rate" per annum on a reducing balance, said Youth PS, Mr Kinuthia Murugu.
About a month ago The Standard reported these rates would be between 10 and 12 per cent. We have now established that three percentage points will go to the Government to build up the fund for future lending. Mr Isaac Kamande, chief economist in the Youth Affairs ministry, confirmed that the government decided to charge three per cent to build a revolving fund.
Loans exceeding Sh500,000 will require approval by a board to ensure that no youth entity takes a disproportionately huge amount.
Kuti said his ministry would conduct nationwide training campaigns through youth polytechnics and the National Youth Service to train the youth on ways of accessing the funds.
Financial institutions already on the list as intermediaries are K-Rep Bank, Equity Bank, Kenya Women Finance Trust (KWFT), and Kenya Industrial Estate (KIE).
Others are the Kenya Union of Savings and Credit Cooperatives, Business Initiatives and Management Assistance (BIMAS), Agricultural Finance Corporation (AFC) and Family Finance Building Society.
Source: The East African Standard
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