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Fuliza: Hustler Fund set to join growing market of quick mobile lenders

Hawkers going about with their business in Nyeri Town. [Kibata Kihu, Standar]

The Sh50 billion Hustler Fund will take the battle for the lucrative fast-growing market for quick digital credit that does not require collateral to market leaders, including Safaricom, NCBA and KCB.

The Cabinet on Tuesday gave the final approval for the much awaited fund, paving the way for its final rollout in conjunction with banks, saccos and telcos like Safaricom at the end of the month.

On Thursday, President William Ruto urged MPs allied to his ruling Kenya Kwanza coalition to back the legal framework once it’s tabled in Parliament.

“The ground-breaking Fund is expected to open up affordable credit facilities for the majority of Kenyans who had previously been locked out of credit facilities and to boost a savings culture while creating momentum for sustainable development,” said a Cabinet dispatch on Tuesday night.

The fund is structured with four products; namely personal finance, micro loans, SME loans and start-up.  

The Cabinet said it welcomed the support received from the regulators, including the Central Bank of Kenya, financial intermediaries, financial institutions and mobile network operators in steering the development of the revolutionary financial product.

“The implementation of the administration’s signature pledge is tipped to liberate the people of Kenya from the bond of predatory lending,” said Cabinet.

The first phase of the rollout is expected to be launched on November 30.

Under the plan the loan limits will be a minimum of Sh500 up to a maximum that will be determined by the borrower’s credit score, and capped at Sh50,000.

“As a first single digit credit product in the country and the region, the loan interest rate will be capped at 8 per cent per annum computed on a pro-rated basis,” said Cabinet.

The new micro loans by the Hustler Fund will join competitors, including KCB Group’s KCB M-Pesa and NCBA’s M-Shwari 

Market leader Safaricom also operates the Fuliza overdraft facility, which was launched on January 5, 2019, in a partnership with Commercial Bank of Africa (now merged into NCBA) and KCB Group. 

Growth driver

Launched in 2012 on the Safaricom mobile money application M-Pesa, M-Shwari has become a key growth driver for both Safaricom and NCBA. KCB M-Pesa, on the other hand, was launched in March 2015. 

Safaricom dominates the mobile loans segment where borrowers get loans within minutes via their mobile phones, making digital loans a quick fix for daily bills.

Mobile money has grown to be a lucrative revenue stream for telcos and credit providers, as customers use them to send cash, pay for goods and services and take short-term credit. 

Abusers of the much-awaited Sh50 billion Hustler Fund will face a five-year jail term or a Sh10 million fine as the new administration moves to clamp down on embezzlement by borrowers and officials that has been synonymous with previous similar government-backed funds.

The National Treasury recently published strict guidelines for accessing the fund that signal it will not be a stroll in the park for potential borrowers.

“A person who misappropriates any funds or assets of the Fund, or assists or causes any person to misappropriate or apply the funds otherwise than in the manner provided in these regulations; or fails to give information or gives inaccurate or misleading information or falsifies information or misrepresents information required...commits an offence and shall be liable to a fine not exceeding ten million shillings or a term of imprisonment not exceeding five years, or to both,” say the regulations by the Treasury.

The State has also signalled it could deploy debt collectors to pursue unpaid loans in its planned low-interest credit Fund to help small and micro enterprises access affordable capital.

“All sums due to the Fund shall be recoverable as debts due to the Fund,” said the Treasury yesterday. 

The involvement of debt collection could set up thousands of borrowers for property seizures.

Involving debt collectors signals the new government is stepping up efforts to enhance repayment of the key inaugural Fund and stem defaults.

Similar State funds have in the past suffered embezzlement and mismanagement and in instances faced collapse under the weight of loan defaults. 

Dr Ruto, who was elected on a campaign platform of lifting low-income groups from biting poverty, said earlier that small businesses will be charged a simple fee to access the money. 

“I want to promise the country that the Hustler Fund is going to be on a single-digit interest rate. For the smaller enterprises, we will begin with just a simple fee, without interest; because we want to fire the bottom of the pyramid,” he said recently. 

The Treasury said last Saturday that financial institutions, including commercial banks and credit cooperative societies (saccos), will play a big role in disbursing the fund.

According to the draft rules, a financial intermediary like banks, saccos, microfinanciers may as such apply for a loan from the Fund for on-lending to a businessperson or micro, small and medium enterprises. 

“The Fund shall leverage on existing commercial infrastructure, including mobile payments platforms and financial institutions, including agency, co-financing and on-lending partnerships,” said the National Treasury draft regulations. 

“Provided that such partnerships are not exclusive or preferential, are technology neutral and do not confer market advantage to any partners over competitors.”