Microfinance ordered to pay Sh150 million refund to youth fund
National
By
Kamau Muthoni
| Jun 11, 2026
A microfinance institution will now pay the Youth Enterprise Development Fund (YEDF) more than Sh150 million in addition to interest from 2014, after the High Court found that it had breached its contract by failing to disburse the money to the youths and provide a guarantee to those who needed loan facilities.
In his judgment, High Court Judge Freda Mugambi ordered Indo Africa Finance Limited to pay the government-owned entity Sh150 million, plus a six per cent per annum interest from 2014 until the money is cleared.
At the same time, she barred Indo Africa from dealing or transferring money in its Co-operative Bank account until the amount is cleared.
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The push and pull between the Youth Fund and Indo Africa revolved around ABC Bank. In its case, the fund argued that it wired the money to the microfinance’s account as had been agreed, but the money was never remitted.
In its counterclaim, Indo Africa accused ABC of its losses, but demanded more than Sh 750 million from YEDF, claiming that it had breached the contract by not remitting the money directly to ABC.
However, Justice Mugambi said that, in its own admission, Indo Africa could not be paid by taxpayers as it had separately told the court that ABC Bank was to blame for the losses it allegedly incurred.
At the same time, she said, the lender could not demonstrate how it lost money in the deal.
“ In the present matter, the defendant seeks to recover colossal sums from public funds for losses which, by its own admission in another suit, were occasioned by ABC Bank and not the plaintiff, which it cannot demonstrate were actually incurred and which in part, arise from its own capital rather than the plaintiff’s advance. To permit such a claim would amount to unjust enrichment at the expense of the Kenyan public. The counterclaim is therefore devoid of merit and is hereby dismissed with costs to the plaintiff,” said Justice Mugambi.
In the case, YEDF board told the court that the agreement was that Indo Africa would provide a Sh 150 million bank guarantee as security.
It stated that it released the money into the Indo Africa’s account at Co-operative Bank with a requirement that it would remit the same to ABC bank to activate the guarantee. However, YEDF said that the microfinance failed to remit the money, hence breaching a five-year contract.
It also argued that Indo Africa had misinformed it that there was an eight-month guarantee before ABC Bank formally confirmed that there was no such thing.
The court heard that the total loan portfolio contemplated was Sh 750 million, comprising Sh 150 million to be invested by Indo Africa in its capacity as guarantor, and Sh 600 million to be invested by the microfinance as the participating financial institution.
Indo Africa on its end, sought the same amount of money from YEDF. It alsoclaimed that it had utilized the money in lending to youth enterprises as had been agreed.
It accused the government agency of being the cause of the rift between it and ABC Bank by remitting the money to Co-operative instead of ABC.The microfinance asserted that the ineffectiveness of the guarantee was the direct consequence of the YEDF’s breach of the agreed funding mechanism. It also claimed that when issues arose with ABC Bank, it secured an alternative guarantee from Co-operative Bank. According to it, Youth Fund rejected the alternative and made it impossible to perform its obligations.
The Leon Muriithi Ndubai-led microfinance said that it had disbursed more than Sh 581 million to youth beneficiaries. It asked the court to order YEDF to pay more than Sh 761 million as compensation for rejection of the alternative guarantees, costs of procuring bank guarantees, reputational damage and loss of business opportunity.