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Dodson-Echeverria, Tracy

Metts, Nansea

Metts, Robert  L.

Oleson, Theodore

English

DigitalCommons@ILR

Report on the Disabled Persons Loan Scheme 
of Project Ken/86/037 
Robert L. Metts, Phd., ILO Consultant with Nansea Metts, Theodore 
Oleson & Tracy Dodson-Echeverria, November 23, 1993 
Executive Summary 
The Disabled Persons Loan Scheme (DPLS) was initiated as one of five 
components of a United Nations Development Programme (UNDP), 
International Labour Organization(ILO), and Government of Kenya (GOK) 
project to assist Kenyaâs disabled persons (KEN/86/037/01). 
As originally envisaged in the KEN 86/037 Project Document, in its initial phase 
the DPLS was to provide 300 clients form 20 district in Kenya with basic 
business training and loans. Subsequently, the target figure for the initial phase 
was modified, and, as a result, the DPLS is not to provide 810 clients with basic 
business training, and 300 of these clients with access to commercial credit. The 
provision of these services is the joint responsibility of the ILO Project Office, the 
GOK, BBK, and the three sub-contracted Kenyan NGOs. 
The objectives of the DPLS are; 1) to facilitate self-employment in Kenya's 
informal sector for 300 disabled micro-entrepreneurs, 2) to generate further 
informal sector employment opportunities within the businesses either created or 
expanded as a result of the DPLS, 3) to help foster an atmosphere of acceptance 
of disabled people as clients and potential clients by BBK and other banks in 
Kenya, and 4) to raise the self-reliance of Kenya's disabled people, and thus raise 
their self-esteem, and their statuses within their families and communities. The 
client population is also to be gender balanced. 
The consultant was retained by the ILO; 1) to assess the impact of the DPLS on its 
clients, 2) to evaluate the contract with the three sub-contracted Kenyan non-
governmental organizations (NGOs) and to assess the efficiency, effectiveness, 
and sustainability of the services which they provide, 3) to evaluate the contract 
with Barclays Bank of Kenya (BBK) and suggest ways in which it may be 
improved in the future, 4) to analyze the possible impact that future macro-
economic events and policies in Kenya will have on the DPLS, and 5) to develop a 
structural framework within which the activities initiated under the DPLS can be 
sustained after the ILO project comes to an end. 
The DPLS system is comprised of six components: 1) identification, 2) selection, 
3) training, 4) loan approval, 5) follow-up assistance, and 6) repayment and debt 
collection. According to Summary Table 1 (Table 3-1 in the Report), which is 
current as of July, 1993, 2693 clients have been identified, of which 826 have 
been trained, 569 have presented business plans to BBK, and 238 have received 
loans totaling Kshs. 4,328,300. Of those who have received loans, 16 have fully 
repaid, 111 are repaying on schedule, 20 have been in arrears for between 1 and 4 
months, and 107 have been in arrears for over 4 months. Recent evidence 
suggests that the arrears rate has been improving since July, however. 
Summary Table 1 
 IYB PFP VMS ILOPO TOTAL 
Clients Identified 1,078  1,063 506 46 
2,693 
  
Selected and Trained 298 256 236 36 826 
Prepared Plans  178 194 193 4 238 
Received Loans 80 74 80 4 238 
Disbursed (Kshs.) 1,311,800 1,255,000 1,731,500 50,000 4,348,300 
In Arrears (1-4 mo.) 10 12 6 2 20 
In Default (over 4 mo.) 39 37 31 0 107 
Average Loan  16,398 16,959 21,644 12,500 18,270 
  
The number of persons trained (826) exceeds the 810 that the NGOs have 
contracted to train during the project cycle. The number of clients receiving loans 
(238) is close to the project target of 300. Therefore, it appears that the DPLS is 
in a position to meet its quantitative loan objective by the end of the extended 
project cycle in February 1994. These results indicate that the DPLS has been 
successful in terms of output, but that it is experiencing two serious problems; 1) 
a low percentage of trained clients who are receiving loans (28.8%),and 2) a high 
percentage of loan recipients who are in arrears or default (53.4%). 
To determine the impact of the DPLS on those of its clients who have received 
loans, the consultant collected data for all of the loan recipients and surveyed a 
representative sample. The results reveal that the DPLS has also been successful 
in fulfilling its broader social objectives. The DPLS has significantly raised the 
financial statuses within their families and within their communities. It has 
generated positive working relationships between BBK and the disabled loan 
recipients, and, though the loans have not been evenly distributed across 
genders, a reasonable gender balance has been achieved, Also, by extrapolating 
the sample trend with respect to indirect employment creation to the total 
number of loans given, it may be estimated that the project has generated 85 new 
jobs within the businesses that were established or expanded as a result of the 
loans. 
The consultant's analysis of the impact of the DPLS on its target population, and 
his analysis of the objectives of the DPLS, indicate that the DPLS has had a 
significant positive impact on its clients, and that its strategy and its institutional 
structure are generally robust. Therefore, the consultant recommends 
continuation of the activity within the districts already served, and the expansion 
of the remaining districts in Kenya which exhibit characteristics associated with 
cost-effective implementation. 
The consultant also recommends that the strategy be modified in order that the 
project may become sustainable and overcome the two most serious problems 
that it currently faces; 1) the low percentage of trained clients who are receiving 
loans (28.8%), and 2) the high percentage of loan recipients who are in arrears or 
default (53.4%). 
With respect to the sources of funding and the objectives of the Project, the 
consultant recommends the GOK apply to UNDP for funding for a four year 
transitional phase of the Project in which its general objectives are; 1) to transfer 
the execution of the Project form the ILO to a national entity, 2) to modify the 
Project's service delivery system to improve the quality of its services, 3) to 
continue to operate in the districts currently service, 4) to expand the Project's 
services to all of the remaining viable districts in Kenya, and 5) to establish 
sources of future funding for the Project other than UNDP. 
The consultant recommends seeking UNDP funding for the next phase of the 
Project for the following reasons: 
a) The Project has been generally successful I fulfilling its objectives in the first 
phase (Chapts. I, II, and III). 
b) The activities associated with the Project are closely aligned with the objectives 
of the UNDP Fifth Country Program, and with the objectives of Kenya's Seventh 
National Development Plan (sec. 6.2.1). 
c) Understaffing of the DPLS at the administrative level (secs. 3.1.1 and 3.1.2), has 
led to an insufficient amount of DPLS resources being devoted to fundraising in 
the first phase. 
d) The recent international withdrawal of aid to Kenya (sec. 3.2.3) has 
significantly limited the funding options for the Project at the present time, thus 
rendering it unlikely that other funding sources will be secured by the end of the 
first phase of the activity in February 1994. 
The consultant recommends that the ILO continue to execute the project during 
the four year transitional period. The consultant does not recommend that the 
ILO assign a Chief Technical Advisor to the project, but that it provide the Project 
Staff with assistance in implementing the recommended modifications in the 
service delivery system, in developing the fundraising strategy, and in developing 
the Board of Directors. 
The consultant recommends that a Project Office be established to administer the 
Project, consisting of a National Project Co-ordinator, a Trainings and Operations 
Manager, an Administrative Assistant, a Data Specialist, a 
Secretary/Receptionist, and two Drivers. 
The consultant recommends that the service delivery system be modified in the 
next phase. He specially recommends, 1) that a second training be added, and 2) 
that an appeals process be added for those clients whose loan applications are not 
approved by BBK. He also recommends a number of changes within the existing 
components of the service delivery system which he believes will in crease the 
proportion of trained clients who receive credit, and decrease the percentage of 
clients in arrears and default. 
The consultant recommends that the Project concentrate its services in 
geographical areas with the most potential for success in the next phase. He 
specifically recommends that resources be focused in areas; 1) with macro-
economic environments that are conducive to the profitable operation of small-
scale enterprises, and 2) where the Projectâs services can be provided in the most 
cost effective manner. 
With respect to the NGOs, the consultant recommends; 1) that the success 
criteria for the NGOs be performance based, 2) that, in order to increase the 
number of visually impaired and hearing impaired clients served by the Project, 
the NGOs receive a greater payment per client for visually impaired and hearing 
impaired clients, 3) that gender balance become part of the contracts with the 
NGOs, and 4) that the NGOs be paid in dollars to control for inflation. He also 
recommends that there be minimum requirements for Business Advisors (Bas) in 
terms of education and experience, and that the NGOs be required to adhere to a 
consistent salary schedule for BAs that includes a minimum salary 
commensurate with the minimum requirements established for the job. To 
reward successful Bas, and to have a system to handle ineffective Bas, the 
consultant recommends that a mechanism for evaluating the effectiveness of Bas 
be established. 
To mitigate the negative consequences of inflation on the Project, the consultant 
recommends that the Guarantee Fund be held in a US Dollar account in the 
future, and that withdrawal and conversions into Kenya Shillings be made only as 
needed. To facilitate the conversion of the fund into dollars, the consultant 
recommends that the Kenya Shillings remaining in the Fund be spent 
immediately to cover operating expenses, and then replaced by US Dollars to be 
held in a separate account. 
 
With respect to BBK, the consultant recommends that the ceiling on the amount 
that the Project is willing to risk on any individual loan be raised to Kshs. 
150,000, and that BBK share the risk with the Project according to the following 
schedule: Loans of Kshs. 150,000 and below will be guaranteed by the Project as 
they are presently. For loans of Kshs. 150,000 to Kshs. 500,000, clients will be 
required to provide security for 30% of the loan, while BBK and the Project will 
share the remaining 70% of the risk 50/50. For loans between Kshs. 500,000 and 
Kshs. 1,000,000 the clients will be required to provide security for 50% of the 
loan, and the Bank will assume the risk for the remaining 50%. 
Finally, the consultant suggest that debt collection must be carried out by BBK if 
the Project is to be taken seriously as a facilitator of mainstream commercial 
credit. Therefore, the consultant recommends that BBK be persuaded to take on 
this responsibility, even if the Project has to share the costs associated with BBK's 
debt collection.  
 


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