The Treasury spent Sh401.98 million in the financial year ended June 2024 under the Financial Fund or Hustler Fund product following President William Ruto’s directive to start gifting long-term savers a shilling for every two saved in the fund.
President Ruto introduced the incentive in November last year as the Fund marked one year, with the government committing to match pension contributions on a 2:1 ratio up to a maximum of Sh3,000 per annum.
Treasury’s latest disclosures show that the cost of incentivising savers is expected to grow more than six times to Sh2.5 billion in the current financial year and hit the Sh5 billion mark in the 2026/2027 financial year, presenting a pensions headache to taxpayers.
The Sh401.98 million spending came in the period individuals saved Sh3.3 billion while micro-enterprises saved Sh0.9 billion. The savings were significantly lower compared with the Sh52 billion loans that had been tapped by over 22 million borrowers by the end of June this year.
President Ruto's administration rolled out the Hustler Fund in November 2022 to offer digital credit to individuals and micro, small, and medium-sized enterprises (MSMEs).
Apart from the loans of between Sh500 and Sh50,000, the product also allows short-term and long-term savings.
The product is structured in a manner that makes it compulsory for borrowers to save five percent of their loan. Those not seeking loans can opt into the product and load in money as savings.
All 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).
While one can access short-term savings any time for as long as they have paid at least 30 percent of their loan, the State introduced tough conditions for accessing the pension saved under the Hustler Fund.
Those aged between 18 and 30 years will have to save for a minimum of 10 years from the date of joining or for a maximum period of terminating at age 35.
Pension savers aged between 31 and 40 years have to save for seven years or wait until they are 45 to access the money. Those aged 41 to 50 must save for five years from the date of joining or hit 50 to access the money. Those above 50 must save for at least three years to have access.
Ministry of co-operatives and MSMES projects the hustler fund loans will hit Sh60 billion in the financial year 2025/2026, with the number of individuals and groups accessing the loans hitting 25 million and 120,000 respectively.
According to the Ministry, personal savings are expected to hit Sh3.88 billion in the next financial year while savings by micro-enterprises are projected at Sh2 billion.
The Fund is however grappling with high default rates. Data from the Ministry showed more than half of the 24 million borrowers had defaulted loans worth Sh11 billion by September, hitting the fund with non-performing loans ratio of 21 percent on its Sh57 billion loan book.
At 21 percent, the default rate is higher than that on commercial loans where NPLs ratio stood at 16.7 percent at the end of August.
The default rate is also way above that of Fuliza, a similar product run by Safaricom and underwritten by KCB Bank Kenya and NCBA.
Safaricom disclosures showed that none of the Sh450 billion disbursements by the end of September was in default.
The Fund last month opened a search for credit scoring services for customers, saying that this will help it to improve efficiency. The assignment will entail engaging beneficiaries to determine baseline information and determine the appropriate credit scoring method for the beneficiaries.
The ministry warned that it was going to initiate a crackdown on defaulters using personal identification numbers. Given that telcos are only offering a platform for disbursement, the government cannot utilize mobile money balances to recover the loans.
