A fifth of Nyota start-ups set to fall with Sh1bn

This will put a fresh spot light on government-backed funds like the Hustler Fund, which has faced the challenge of high default rates.

Principal Secretary in the State Department for Micro, Small and Medium Enterprises, Susan Mang’eni, said the State was working on an 80 percent success rate for business startups under Nyota, which supports youth with capital and training.

“We realised if we can stimulate economic participation of at least 70 young people in every ward across the country and even if eventually you have a success rate of 50 percent or even 80 percent, our target is about 80 percent, then you would have impacted on the economic landscape of those areas and this is what will bring about opportunities,” Ms Mang’eni said.

The Sh1.06 billion is 20 percent of the Sh5.28 billion that has been set aside for business expansion and startup capital under Nyota.

The government targets giving between 70 and 84 youths in every ward grants of Sh50,000 to start or expand their businesses.

So far, Sh3 billion has been released to about 120,000 youths across the country, with President William Ruto presiding at public fora held to popularise the initiative.

The 120,000 youths have received the first tranche of Sh22,000 into their accounts, while Sh3,000 was channelled to their National Social Security Fund (NSSF) accounts as savings.

They will receive the second tranche after two months.

At least 24,000 enterprises are expected to fall based on the government projections that 80 percent of the firms will struggle to remain afloat.

Thousands of small businesses in Kenya collapse within their first five years due to poor financial management, high operating costs and limited access to affordable credit.

Nyota will run until December 2028. Out of a Sh33 billion budget, the multilateral lender is funding Sh29.5 billion, a loan component of Sh25.8 billion.

Under the Nyota initiative, the State targets to benefit 820,000 youths aged 18 to 29 across the country with business grants, skilling and digital training on access to government opportunities.

Read: Kibaki, Uhuru-era funds falter as Hustler, Nyota rise

The 120,000 beneficiaries of the business capital and expansion grants will receive a total of Sh6 billion, but Sh720 million will automatically go to NSSF savings.

This means that the actual amount the State expects to be injected into their businesses is Sh5.28 billion.

Ms Mang’eni said the government estimates between half and 80 percent of these investments will actually sail through challenges in the business environment to form stable enterprises that can create jobs.

“So far, we’ve done the first instalment of the startup capital and we have disbursed more than Sh3 billion to them. From the 120,000 entrepreneurs that we are supporting, we are likely to experience probably half of them or even quite a few of them being the next generation of manufacturers,” the PS said.

To boost the success rate for enterprises funded under Nyota, the PS said they will be mentored for about two months after receiving the funding.

Other than the 120,000 youths being issued with business grants, the Nyota programme will also provide digital training to 600,000 youths on how to access government opportunities, undertaken by the MSME State Department.

The programme also plans to equip 90,000 young people with in-demand skills to boost their employability and certify some 20,000 youths after taking them through skilling initiatives.

The Nyota programme aims to address high unemployment rates in the country by ensuring that youth with education levels from secondary school and below have an opportunity to get skills, business capital and information on how to access government opportunities.

It borrows from a previous World Bank-funded programme, the Kenya Youth Employment and Opportunities Project (KYEOP), which ended in 2024.

Under KYEOP, some 87,432 Kenyan youth benefited from a Sh15 billion funding, out of which the World Bank gave Sh9.2 billion, and the government Sh5.8 billion.

An audit on the KYEOP programme later established that about half of the 553 beneficiaries sampled on the performance of their enterprises “were either unreachable on phone or non-cooperative by not willing to give directions to their premises, while some indicated that their businesses had failed.”

The public auditor sampled 308 beneficiaries who received business startup grants under KYEOP, but 98 were unreachable and 119 declined to give audience to auditors.

“Out of 91 youth businesses physically verified, 16 had been wound up,” the auditor said.

Last year, the World Bank said it had employed blockchain technology to track the movement of funds disbursed under Nyota.

“Furthermore, impact evaluations and tracer studies will be conducted to gather robust evidence on effective interventions and necessary adjustments,” the World Bank said.

The multilateral lender took the precaution following the audit, indicating that some KYEOP beneficiaries could not be traced or refused to indicate their locations when reached out to by auditors.

A 2016 survey on MSMEs in the country established that more than 400,000 small enterprises closed shop annually, mainly due to a shortage of operating funds, lack of market and a shortage of raw materials.

The survey showed that while Kenya had 7.4 million MSMEs employing 15 million persons, about 2.2 million had closed down in just five years.

“On average, businesses were closed at the age of 3.8 years. Establishments that were started or acquired within the last two years were more vulnerable to closures and they accounted for 61.3 percent of the total businesses closed,” Kenya National Bureau of Statistics (KNBS) said in the survey.

Recent revelations showed that the government splashed Sh1 billion under the Nyota programme on consultancies and administrative expenses in the year ending June 2025.

“During the 2024/25 FY, the Authority received a total of Sh1.032 billion for Nyota and was able to absorb 100 percent of the amount on administrative activities and consultancy services,” the Micro and Small Enterprises Authority (MSEA) said.

The World Bank released a total of Sh1.223 billion to the government towards the Nyota during the year ending June 2025, including the Sh1.032 billion that went to MSEA.

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