Two weeks ago, President William Ruto launched the Hustler Fund, marking the start of implementing the bottom-up transformational agenda that targets uplifting the economic standing of between 10-15 million Kenyans by facilitating access to affordable credit.
The question has been, is this achievable?
In 1974, Economist Yunus Mohammed identified that lending had gone personal and individual, and poor women in Bangladesh were locked out of accessing commercial loans.
He established the non-profit Grameen Bank which was based on a micro-credit approach of issuing small loans at reasonable interest to individuals, especially poor women.
The over 98 per cent payback rate and the idea revolutionised Bangladesh. What everyone knows today as micro-finance lending emerged from the Grameen Bank micro-credit approach.
The Hustler Fund innovation heavily borrows from the original thoughts of Yunus Mohammed.
Kenya’s credit market structure has always exacerbated inequality, with those at the bottom of the pyramid facing barriers to economic participation.
The FinAccess Survey (2022) found that only 20.7 per cent of MSMEs nationally use formal financial services and products as the main source of finance.
For farmers specifically, only 15.8 per cent access these services and products. Nationally, 70 per cent of Kenyans live in rural areas, and two-thirds of the rural dwellers are farmers.
If the government can manage to provide a wide spectrum of financial services to at least 60 per cent of farmers in the next five years, the economic lift will be on an unprecedented scale.
The future, therefore, demands the incorporation of distributive access to financial inclusion and the Hustler Fund is such an affirmative action plan.
Market failure
Prior to mobile money penetration, shopkeepers were known to be the biggest lenders to those at the bottom of the pyramid.
Mobile network companies’ disruption led to the onboarding of both borrowers and lenders on the mobile platform.
Consequently, borrowers found themselves in a modern epidemic, with more than eight million Kenyans condemned and blacklisted on the CRB system because of exorbitant lending rates with predatory terms.
This regulatory inaction left those at the bottom of the pyramid starved of capital to contribute to gainful economic activity. This is the travesty in our credit market.
In retrospect, this is the contextual prism through which the Hustler Fund should be looked.
It is a disruptive and interruptive intervention necessitated by a market failure problem.
Savings have also been incorporated into the Hustler Fund, informed by the retirement saving crisis Kenya faces.
According to the FinAccess Survey (2022), pensions usage stands at 10.6 per cent nationally with only 13 counties having their usage above the national average.
The government will contribute one shilling for every two saved by those who borrow from the Hustler Fund products.
This savings component of the Hustler Fund shows that the innovation is premised on evidence-based policymaking.
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Note: The results are not exact but very close to the actual.
