The Women Enterprise Fund is struggling to recover more than Sh2.5 billion in unpaid loans, raising fears that thousands of women may miss out on affordable financing as money meant for new borrowers remains tied up. A new audit has also uncovered weak loan recovery efforts, governance failures and growing financial strain within the state fund.
An audit by Auditor General Nancy Gathungu shows the fund is facing mounting challenges in collecting outstanding loans, with auditors questioning whether billions of shillings owed by borrowers can be recovered.
The Women Enterprise Fund was established to provide affordable credit to women who want to start or expand businesses, especially those unable to secure financing from commercial banks. However, the latest audit shows that a large share of the revolving fund has remained locked in overdue loans instead of supporting new beneficiaries.
According to the report, loans worth Sh1.12 billion issued through the Constituency Women Enterprise Schemes have remained unpaid for more than one year, contrary to the fund's lending policy. Another Sh695.75 million disbursed as digital loans to 15,234 women groups between July and September 2023 has also remained unpaid for more than two years.
“The management did not explain the measures instituted to recover the loans,” the auditor general says.
The audit questions the recoverability of the fund's Sh2.54 billion loan portfolio after management failed to provide evidence of effective recovery measures. This means money that should be supporting more women entrepreneurs remains unavailable because of unpaid debts.
Auditors also questioned Sh70.26 million advanced through eight financial intermediary partners. Although the debts had been referred for legal recovery, there was no evidence showing the progress of the cases or whether any of the money would be recovered.
“The accuracy and recoverability of the receivables could not be confirmed,” the report says.
The report further raised concerns over a Sh258.72 million staff car and mortgage loan scheme after auditors found no records indicating the beneficiaries, amounts borrowed, repayments made or outstanding balances.
The audit also points to growing financial pressure at the fund. During the financial year, it earned Sh387.24 million but spent Sh631.41 million, resulting in a deficit of Sh261.7 million.
Although this was lower than the previous year's deficit of Sh324.72 million, auditors warned that continued losses could affect the fund's ability to sustain its operations.
“The fund therefore continues to operate at a loss, which, if not managed, may affect its future operations and sustainability of services,” the report states.
The audit also exposed weaknesses in the digital lending programme. Auditors found that the Women Enterprise Fund does not own or control the platform used to process Sh941.9 million in digital loans, limiting its ability to monitor lending activities and detect possible fraud.
The review further found that more than 569,000 members had been registered in multiple groups. Another 6,192 groups received Sh307.92 million using duplicate loan identification numbers.
Auditors also established that thousands of groups that did not meet the required membership threshold still received loans, while some beneficiaries were issued amounts below the approved minimum.
The findings show that the fund lacks adequate controls over its digital lending system, exposing it to weaknesses in loan management and oversight.
The report also highlighted governance and staffing concerns. The board held 41 meetings during the financial year, many of which were not properly approved. Auditors also found that the fund operated with an unbalanced budget, contrary to public finance laws.