More than two million borrowers on the State-run Hustler Fund will have their borrowing limit increased by as much as 300 percent and their repayment period more than doubled following the launch of a new product aimed at graduating them to the formal credit market.
President William Ruto unveiled the new borrowing product, dubbed Bridge Loan, during the second anniversary of the financial inclusion fund, a key flagship programme of the administration’s Bottom-Up Economic Transformation Agenda.
Beneficiaries of the Bridge Loan product will access up to three times their current credit limit at an unchanged annual rate of eight percent, with the repayment period extended to 30 from 14 days, based on a new credit scoring system which has nine categories.
Borrowers through the Bridge product will also be given a month rollover period at an enhanced interest of 9.5 percent.
Those who have consistently borrowed and repaid on time have been assigned a credit score of A1 or excellent, while the worst score for defaulters is C3 which denotes the worst creditworthiness on the platform.
“Over the last two years, we have assessed all the borrowers on the Hustler Fund, and today we can – with data, information, and credible understanding – assign every borrower a score that will now be the next collateral for them to borrow money within the ecosystem of the Hustler Fund,” Dr Ruto said in Nairobi on Monday.
“I want to ask banks and financial institutions to look at the Hustler Fund repayment records. We will work with them so that, using our credit scoring mechanism, we can know the good borrowers and they can lend them money as we go into the future.”
A total of Sh60.5 billion has been dished out to some 24.7 million borrowers since the Fund was rolled out in late November 2022.
Repayment rate is estimated at 79.50 percent, or Sh48.1 billion, while more than Sh12.4 billion has been defaulted.
Savings stood at Sh3.5 billion following the launch of the product in November 2023 following a restructuring that made it compulsory for borrowers to save five percent of their loan.
The money marked as savings is split into two, with 30 percent going into short-term savings and 70 percent going into long-term savings (pension) under a scheme managed by Kenya National Entrepreneurs Savings Trust.
Cash under long-term savings will generate a return equivalent to prevailing treasury bills, Dr Ruto announced on Monday, increased from three percent less the average T-bill rate previously.
Those not seeking loans on Hustler Fund can opt into the saving product and load in money as savings.
According to Co-operatives and Micro, Small and Medium Enterprises Development Cabinet secretary Wycliffe Oparanya, slightly more than a third (34.82 percent), or 8.6 million accounts, were repeat borrowers, while the remainder majority (16.1 million accounts) took the money and vanished.
About 52 percent of the borrowers on Hustler Fund are men, with the remainder being women. The data also showed that 61 percent of the borrowers were youthful, 29.3 percent were aged between 40 and 59, while the remainder 9.4 percent were above 60 years.
