Equity Group has set sights on creditworthy small traders under the government-backed Hustlers Fund with a planned Sh250 billion revolving fund.
The lender said micro- and small-sized businesses which repay at least two loans on time under the Sh50 billion government’s financial inclusion fund will qualify for up to three times more credit.
The loans to businesses that graduate from the Hustlers Fund will be trained in financial literacy, entrepreneurship, business management skills, digital literacy and networking under Equity’s Young Africa Works Kenya before getting loans.
Africa Works Kenya programme is backed by Mastercard Foundation with support from the government.
“Once someone has borrowed two or three times from Hustlers Fund…they’ll graduate to the Young Africa Works programme by Equity,” the lender said.
“They will be capacitated through training and also funded as part of the Equity’s Africa Recovery and Resilience Plan which targets to support five million MSMEs.”
The Hustlers Fund, scheduled for launch next month, will provide State-backed loans to small businesses that have struggled to access financing from mainstream banks.
Loans under the Fund, which targets to derisk lending at the bottom of the credit market pyramid, will be capped at Sh50, 000 and priced at an annual interest of eight percent.
“The Hustlers Fund has won our hearts because of its design around financial discipline. It is not free money. It is going to be repaid. It is a loan that you have to have credentials in terms of credit rating [to access], it forces you to have saving culture… and it reaches the masses,” Equity Group chief executive James Mwangi said.
“The risk is being taken by the government. We will support it by scaling. People will graduate from Hustlers fund to private sector Hustlers fund.”
The fund will be the centerpiece of President William Ruto’s job creation agenda on the back of additional hiring freeze by the previous administration, except for essential service sectors such as education, health and security.
Similar affirmative action funds, including Uwezo Fund, have over the years chalked up massive bad debt, creating a liquidity crisis that has threatened their sustainability.
“The Hustlers Fund is an instrument to correct market failures at the bottom of the pyramid,” Njuguna Ndung’u, the Treasury secretary, said on November 11.
“Most of the time we start financial products to address needs at the bottom of the pyramid but what happens is that the product leaves and moves on to the next level… whereas the intention should be that people are the ones to move upwards not the product.”
Persons found guilty of offences related to the misappropriation of money from the Hustler Fund will be fined Sh10 million or handed a prison term of five years.
Borrowers who fail to give information or falsify information while applying for the funds will face the same penalties.
“The object and purpose of the Fund shall be to innovate, develop and deploy bottom of the pyramid financial services and products that are affordable, accessible and appropriate for the unserved and underserved persons, including credit, saving, insurance and investment products,” the draft Public Finance Management (Financial Inclusion Fund) Regulations 2022 read in part.
“The Fund shall leverage on existing commercial infrastructure, including mobile payment platforms and financial institutions, agency, co-financing and on-lending partnerships provided that such partnerships are not exclusive or preferential, are technology neutral and do not confer market advantage to any partners over competitors.”