The Co-operatives and Micro, Small, and Medium Enterprises ministry was the biggest beneficiary of development cash in President William Ruto’s first three months in office as the administration moved to set up a foundation for the Hustler Fund.
Increased capital disbursements to the department of Co-operatives amounted to Sh10.03 billion in three months through December, the single largest expenditure under the development funding, according to the exchequer data released by Treasury secretary Njuguna Ngung’u.
The increased funding of the department, which is at the heart of Dr Ruto’s job creation agenda under the bottom-up model, squeezed out perennial top recipients like infrastructure which is in charge of roads.
The Co-operatives department, which was in charge of the financial inclusion fund before Dr Ruto completed reorganising the government earlier this month, and its initial development budget of Sh422.5 million was 20 times more.
The over-expenditure will be regularised by lawmakers through a supplementary budget expected to be tabled in the National Assembly later this month.
The Hustlers Fund, launched on November 30 in fulfilment of Dr Ruto’s election pledge, provides State-backed loans of up to Sh50,000 to individuals and small traders at an annual interest of eight percent.
Loans under the Fund are aimed at derisking lending at the bottom of the credit market pyramid, a segment which has been locked out of the mainstream commercial banks due to the perceived high risk of default.
“This programme [Hustler Fund] aims to lift those at the bottom of the pyramid through structured products in personal finance that includes savings, credit, insurance and investment in the past interventions moved up the MFIs [micro finance institutions],” Prof Ndung’u said on January 11.
The “Hustler Fund”, Treasury chiefs told the International Monetary Fund officials late last year, is “envisaged to have heavy private sector participation with limited budgetary implications”.
The allocation towards the Hustler Fund is amongst the Sh279.26 billion projected expenditure this financial year which was not budgeted by the lawmakers last June.
The Treasury has forecast the Hustler fund and its pension component —where the government will match every shilling with Sh2 up to Sh3,000 a year —will cost the taxpayers about Sh20 billion this financial year.
The Treasury data shows some Sh5 billion development cash was channelled to the Co-operatives department in November, with a further Sh5.03 billion released last month.
The increased funding to the Co-operatives department squeezed the budget for traditionally top recipients of development cash like infrastructure docket since the reign of President Kibaki in 2002 and his successor Uhuru Kenyatta.
Expenditure by the infrastructure department on capital projects largely building and rehabilitation of roads and bridges amounted to a lowly Sh685.84 million between last October and December, a sharp slide from Sh9.69 billion in the same period the year before.
The data shows the Health ministry was the second largest spender of development funds in the three-month period through December with Sh8.73 billion followed by the National Treasury (Sh8.01 billion) and Basic Education (Sh5.46 billion).
Overall, expenditure on development projects, excluding foreign funding, amounted to Sh53.69 billion in the second quarter of the current fiscal year that ended last December, the least in more than six years.
Reduced spending on development projects such as roads, water, power plants, real estate and electricity transmission lines slows down economic activities, further hurting government revenue, largely taxes.
Cement makers, steel manufacturers, contractors and the thousands of workers employed in the infrastructure pipeline benefit from public spending and usually feel the pinch of a drop in public expenditure on development.
