BUSINESS INCUBATION PRACTICES ADOPTED BY THE YOUTH ENTERPRISE DEVELOPMENT FUND AND THE FINANCIAL PERFORMANCE OF YOUTH-OWNED ENTERPRISES IN KENYA

Abstract

In Kenya, Youth-Owned Enterprises (YOEs) create employment for youths and contributes
to poverty reduction. Despite this, more than a third of start-up YOEs often fails before the
third year of operation, resulting far-reaching consequences at all levels. Youth Enterprise
Development Fund (the Fund) adopted a number of incubatory practices to increase YOEs’
longevity and financial performance. Even though a number of studies have evaluated the
survival and financial performance of YOEs, none has been done in Kenya. The study
anchored on the pragmatism school of thought, the cross-sectional design and mixed
methods approach. Primary data were sourced in mid-2019, from 176 start-up YOEs
financed by the Fund; and Officers of the Fund, among others. Key findings show that all
the business incubation practices adopted by the Fund positively and significantly correlated
with YOEs’ financial performance; with the correlation being strongest for
entrepreneurship training (50.7%), followed by partnership linkages (42.0%), market
access (40.7%), and infrastructure support (23.1%). Besides, all the incubation practices
caused positive and significant effects on YOEs’ financial performance; while the regression
model accounted for 44.1% of improvement in YOEs’ financial performance. The study
concludes that business incubation practices adopted by the Fund significantly improved
YOEs’ financial performance. This implies that: the Fund plays a crucial role in enterprise
development; the incubation practices adopted by the Fund are insufficient; and that the
Fund’s potential in enterprise development is yet to be exhausted. Efforts to strengthen the
Fund should revamp the business incubation program with more strategies, among other
measures.