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Two million good Hustler Fund borrowers to graduate to banks
Principal Secretary, State Department of Micro, Small and Medium Enterprises Development Susan Auma Mang’eni during a press briefing at NSSF Building, Nairobi on July 9, 2024.
The government will assist two million good borrowers in the Hustler Fund to access loans from commercial banks as part of its plans to integrate the so-called ‘hustlers’ into the formal financial system.
Susan Mang’eni, the Principal Secretary of the State Department of Micro, Small and Medium Enterprises (MSMEs) Development said that the borrowers marked for graduation have attained higher credit scores compared to the other Hustler Fund beneficiaries by repaying their loans from the Hustler Fund in time.
“And this is due to the visibility accorded by the Hustler Fund. I see this happening in the next six months,” the official said.
The PS noted that borrowers with high credit scores can access loans from commercial banks even without physical collateral such as title deeds and logbooks. Lenders have traditionally avoided lending to the millions in the informal sector without security.
Already, the government has started giving bridge loans to borrowers with strong credit scores, enabling them to transition from smaller personal loans to larger, business-oriented financing.
Over 22 million Kenyans have benefitted from the Financial Inclusion Fund, a revolving kitty popularly known as Hustler Fund, and credit amounting to Sh62 billion advanced as of December last year.
The Hustler Fund is part of President William Ruto’s Bottom-Up Economic Transformation Agenda (Beta) which seeks to uplift millions of ordinary Kenyans christened ‘hustlers’ from poverty by giving them personal loans.
Under the Fund, which also has a saving component, borrowers receive between Sh500 and Sh50,000 on their mobile phones.
But the fund has also been shaken by reports of non-payments, with the senior government officials including President William Ruto, vowing to go after the defaulters.
Cabinet Secretary for Cooperative, Micro Small and Medium Enterprises (MSMEs) Wycliffe Oparanya had earlier said that of the 21 million Kenyans that had borrowed 19 million had disappeared, raising fears of massive defaults. Ms Mang’eni however said that is not true, noting that the Fund’s repayment rate is at 80 percent.
Out of the Sh5.1 billion allocated to the Fund in the last financial year, only Sh800 million was absorbed compared to Sh12 billion in the previous year.
“We faced financial constraints in the last budget which resulted in only Sh800 million being disbursed to borrowers. At the start, the fund received Sh12bilion and now as I speak, Sh2 billion has been released from the exchequer,” explained CS Oparanya.
Ms Mang’eni explained that while the government will be hesitant to blacklist Kenyans, they have since come up with a credit score system through which they have identified credit-worthy borrowers who they plan to transition to commercial banks.
The PS said that the main objective of the Hustler Fund is to increase financial inclusion by transitioning individuals, most of whom are in the informal sector and have no known security, into the formal financial system.
Interest rates charged by banks are in the double digits range, while Hustler Funds charge an annual rate of 8.0 percent.
The loans are repaid in 14 days, but this can be extended to 30 days.
Under the terms of the Hustler Fund launched on December 1, 2022, a borrower receives 95 percent of the bulk of the amount applied for, while the remaining 5.0 percent is split into short-term savings (at 30 percent of the amount) and pension remittance (70 percent).
The government matches one shilling for every two shillings of contribution to the pension scheme up to a maximum of Sh3,000 per year.
The Kenya Kwanza administration came up with the Hustler Fund to offer cheap loans to individuals and businesses at the bottom of the pyramid that have struggled to access credit from commercial banks while others have been victims of predatory lending from shylocks and digital credit provide
