More than half of the borrowers under the Financial Inclusion Fund or Hustler Fund have defaulted on repayments totalling Sh11 billion, while the non-performing loans (NPLs) ratio hits 21 percent.
According to the State Department for Micro, Small, and Medium Enterprises (MSMEs), about 24 million customers have accessed loans from the fund, while only about two million Kenyans have achieved a high credit rating by making timely and full repayments.
A further eight million people have regularly accessed cash from the fund, which has now been in existence for 18 months.
This leaves an estimated 14 million Kenyans or 58.33 percent, who are classified as defaulters under the facility, which has so far disbursed Sh57 billion worth of loans. Only Sh46 billion of this amount has been repaid, leaving Sh11 billion bad debt.
“We have been able to disburse close to Sh57 billion and repayments stand at Sh46 billion. The repayment rate is about 79 percent and we have a non-performing loans ratio of about 21 percent,” said Susan Mang’eni, the Principal Secretary for MSMEs.
“The high NPL ratio is from the group that borrowed once in the first and second months of the programme and decided to disappear. Unfortunately, they are traceable.”
Defaulters crackdown
Earlier this month, new Cooperatives and MSMEs Cabinet Secretary Wycliffe Oparanya warned that the government would initiate a crackdown on defaulters using personal identification numbers (PINs) or identity card numbers to track them down.
The government hopes to re-integrate two million Hustler Fund borrowers to the mainstream credit market and have them borrow from commercial banks.
The Hustler Fund has been viewed by the government as a rehabilitation programme that will enable Kenyans previously excluded from borrowing from mainstream financial institutions due to the listing of adverse credit information with credit reference bureaus (CRBs) to rehabilitate themselves.
“The most significant outcome from the Hustler Fund experience is that we can now move our population towards a creditworthiness culture. We are reaching out to defaulters, some only need sensitisation to know that repayments will open up access to higher disbursements. I don’t believe that the money is lost,” Ms Mang’eni added.
The push to recover money from defaulters of the fund comes amid controversy after Auditor-General Nancy Gathungu pointed to irregularities within the initiative.
The fund, for instance, issued loans worth Sh465 million to 809,351 Kenyans who had not registered for the product within the first seven months of the entity’s operations.
The Hustler Fund was launched in March 2023 as part of President William Ruto’s manifesto to uplift low-income groups.
The fund has been disbursing loans of between Sh500 and Sh50,000 to individuals for a term of 14 days at an interest rate of eight percent per annum.
Five percent of the disbursement to each borrower is retained as savings, while 70 percent of the amount kept as long-term savings and the balance as short-term savings.
