Kenyans default on Sh9.9 billion Hustler Fund loans

President William Ruto and Prime Cabinet Secretary Musalia Mudavadi during the launch of the Hustler Fund at Green Park Terminus, Nairobi. FILE PHOTO | NMG

The value of Hustler fund loan defaults stood at nearly Sh10 billion in  the first 11 months since the launch of the micro, small, and medium enterprises(MSMEs)-focused credit facility in November last year.

New disclosures from the National Treasury put the overall repayment rate of loans disbursed via the fund at 73 percent revealing significant impairments.

“By the end of October 2023, the fund had disbursed Sh36.6 billion and realised Sh2.3 billion in savings, benefitting 21.3 million customers with 7.5 million repeat customers whose overall repayment rate is at 73 percent,” the National Treasury stated.

The fund’s impairment ratio continues to stand above defaults in major financial institutions including commercial banks, Saccos, and microfinance banks.

For instance, according to data from the Central Bank of Kenya, the ratio of gross non-performing loans to gross loans in the banking sector jumped to 15.3 percent in October 2023 from 15 percent in August.

The accelerated deterioration of asset quality of the State-backed fund, which stood at Sh3 billion in August, nevertheless aligns with heightened credit risks in the economy which has been amidst reduced disposable incomes and increased borrowing costs.

According to the National Treasury, the top borrower of the fund has so far accessed Sh4.5 million in 816 transactions, while the top voluntary saver has amassed Sh631,491.

The Hustler Fund also known as the Financial Inclusion Fund was established in November 2022 as an intervention to correct market failure problems and to cushion MSMEs against the high cost of credit.

The fund which launched a group product within its first year of launch has attracted 50,000 active groups, of which 20,000 have received Sh151 million, according to additional disclosures by the exchequer.

Earlier this month, President William Ruto announced a window for platform users to access part of their Sh2.5 billion in savings accumulated so far while borrowers earned increased loan limits at the first anniversary of the fund on November 30.

Savers on the fund earn an interest that closely tracks the return on Treasury bills with the return in the first year estimated at 12 percent.

Under the fund, five percent of every amount borrowed goes into savings which are further split on a 7:3 ratio, where the larger proportion represents long-term savings while the balance covers short-term savings available on demand by savers.

Defaulters of the fund are barred from accessing the new business loan facility, dubbed the Hustler Group loan.

“We know that there is a percentage of Kenyans who are yet to repay their debts but I can tell you that they will not run far. We have put money in the business loan account but they will not get the loan until you clear your arrears,” President William Ruto said in August.

Beyond the provision of affordable credit via the fund, the National Treasury says the government will review and rationalize all business licenses, and establish business incubation and industrial hubs as further support for the MSME sector.

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