How Hustler Fund stacks up against other kitties

"The merger seems speculative and does not provide any tangible strategies to address the challenges facing the current Funds. The merger will also result in the loss of identity for women and youth and is likely to marginalise people living With disabilities (PWDs), which defeats the purpose for which the three funds were established in the first place, that is, to cater for vulnerable groups (youth, women and PWDs) who cannot easily access loans through conventional banks and other lending institutions," said the committee in a recent report on consolidating the funds.

The Hustler Fund, which is set to get Sh50 billion to lend to individuals and small and medium businesses, is the largest of them all.

Other than its lending bit, the fund has a saving aspect, with borrowers able to set aside some money that they can access in the short term as well as in retirement. This is unlike the other funds, which only have a lending option.

The Hustler Fund is also in comparison to the other funds worth a combined Sh15.38 billion for lending to individuals and businesses run by youth, women and persons living with disabilities.

The three affirmative funds, according to different reports, have together cumulatively advanced more than Sh40 billion to women and youth across the country.

Official data in May this year showed more than three million people had benefited from the kitties since they were launched.

The older funds have grappled with numerous challenges, top among them borrowers defaulting on loans to a point that their revolving aspect, where the next borrower getting a loan is dependent on the previous borrower repaying their loan has been compromised.

The Youth Fund and Women Fund had at the start partnered with financial institutions that would change the script along the way, resulting in disagreements.

Middle-aged man hawking in Nyeri town, Nyeri County. [Amos Kiarie, Standard]

"Loan repayment has a direct bearing on the revolving fund. It is normally considered that a Portfolio at Risk (PAR) of five per cent is a good benchmark in credit risk. Overall, the average recovery rate improved from 58 per cent in the financial year 2015/2016 to 88 per cent in the financial year 2018/2019," said the Youth Fund Board in a report.

"The increasing loan repayment and recovery margins are attributed to the current quality of loan appraisal processes, pre-disbursement training and post-disbursement support as well as follow-ups, loan restructuring and enhanced recovery efforts."

At the onset, it was felt that partnerships with banks and other financial institutions would help the Youth Fund easily reach its target customers.

The fund did not have a countrywide reach that the banks have and hence was seen as an ideal partner for disbursing the loans.

It got into partnerships with a number of financial institutions, which would then be given some money for onward lending to youth-led businesses.

As of 2014, the Youth Fund had cumulatively disbursed Sh12.8 billion in loans to 1.15 million youth-led businesses.

Out of this, Sh7.8 billion was advanced through "on-lending and leverage agreements with financial intermediaries," underscoring the reach of banks and other financial service providers.

The banks, however, reneged on the agreement with the Youth Fund and at some point started hiking rates for products marketed under the fund's banner.