How the Sh50bn Hustler Fund has been mutatingFriday October 21 2022
President William Ruto Thursday promised 'Hustlers' money as the much-touted fund mutated from a small business loans programme to a savings plan with 50 percent returns.
The President said borrowers will be compelled to put money in the fund with the government giving a return of one shilling for every two saved on the platform, a huge return in a market where lenders are offering 3.46 percent on savings.
Kenya Kwanza’s Hustler Fund has mutated from a grant during campaign periods, to a loan product at single-digit rates to now a 10 percent credit facility with a compulsory savings component at 50 percent.
The government said the credit products will be available to small businesses on digital platforms through chamas, groups, saccos and cooperatives from December.
“All borrowers on this platform will also participate in a short-term savings plan and long-term pensions program. Every saving made by borrowers on this platform will be merged by the government of Kenya on a 2:1 ratio to a level to be determined by the program,” President William Ruto said during the Mashujaa Day celebrations.
President Ruto pledged in his manifesto to set aside Sh250 billion over five years for small businesses , promising 100 percent access to affordable funds.
The fund promises to be the centrepiece of the President’s job creation agenda, especially with the outgoing government having extended the hiring freeze in parastatals, dashing the hopes of thousands of jobless Kenyans in an economy where companies are shedding jobs.
The Fund is mentioned eight times in the 68-page manifesto to solve everything from National Health Insurance Fund enrolment, implementing the digital superhighway, funding music talent, and helping boda bodas to acquire electric vehicles and motorcycles to the cure of predatory lending. The Hustler Fund would also finance women-led co-operative societies, chamas, merry-go-rounds and table banks and financial inclusion for the disabled.
Read: Hustler fund on the way, President promises
It is unclear how the fund will be channelled but the government indicated it will be disbursed in partnership with the private sector through digital platforms, attracting interest from corporates like Safaricom and Co-operative Bank.
Co-op Bank’s chief executive Gideon Muriuki said most of the advances are set to be distributed through saccos, which have complementary and synergistic ties to Co-op Bank.
Safaricom with the lending infrastructure, which has facilitated its credit products Fuliza and M-Shwari, is also eyeing to distribute the funds at a fee.
Affirmative Action funds have been key political bargains to get elected to office, targeting millions of small businesses that lack access to bank loans due to lack of collateral and default risks.
Despite banking industry data showing the rate of default among small businesses was lower than that for corporates, lenders continue to assign a higher risk profile to the MSMEs, which usually price them out of the credit market.
Findings of a 2016 survey by the Kenya National Bureau of Statistics (KNBS), for instance, suggested that about 71 percent of the 7.4 million MSMEs in 2015 got less loans than they had applied for from the banks, with about 86 percent forced to rely on family and friends for funding.
Retired President Uhuru Kenyatta created the Uwezo Fund in 2014 to support enterprises owned by youth, women and the disabled.