The presence of Harrison Kenga on stage with President William Ruto during the Hustler Fund anniversary was not the only proof the head of state had that this administration’s financial inclusion programme is working.
His announcement that Hustler Fund will no longer need any allocation from the exchequer indicates his belief that he has been able to not only rectify the lending wrongs of the financial sector but also build a crop of new clients.
“We have 2.2 million Kenyans whose credit score had been impaired who are active borrowers on Hustler Fund,” President Ruto said.
The 2.2 million are part of the more than seven million who had been listed negatively with credit reference bureaus (CRBs).
The Hustler Fund – also referred to as the Financial Inclusion Fund - was one of Kenya Kwanza’s key promises during the campaigns last year.
It charges an annual interest rate of eight per cent, lower than commercial banks where interest rates are hovering at between 14 per cent and 19 per cent.
When Ruto came into office, he vowed to implement Hustler Fund as a means to rehabilitate these borrowers, majority of them small-scale traders, back into the financial system.
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“These people were condemned unheard because of their financial difficulties,” he said.
Mr Kenga is one of such borrowers and is said to have borrowed over Sh714,000 and saved Sh35,730.
He was the example that the president used to prove to the critics that his programme works, and he had numbers to back up.
He said Sh39.5 billion has been disbursed to 19 million borrowers. Hustler Fund has 7.7 million active members with 22 million registered.
Most of the borrowers visit the platform between 4am and 9am.
“Explain to me, where would these seven million go if we did not have Hustler Fund?” Ruto posed during the anniversary celebrations in Nairobi on Thursday.
From every amount borrowed, five per cent is withheld as savings. As a result, Sh2 billion has been saved.
Borrowers, however, have access to low amounts and also have to repay within a month, which limits how much they can do with the loans.
Critics note that factors like the lower loan limits and the short repayment period have only resulted in borrowers taking loans largely for consumption.
Ruto sought to address one of the major challenges borrowers experience by increasing the borrowing limits. For some borrowers, their limits will go up by as much as 100 per cent.
“We will increase the limit of the money that you can borrow from the Hustler Fund,” he said. “We will enhance the limit for 1.2 million regular borrowers.
“For those who have borrowed more than 10 times, your limit will increase by 100 per cent. If your limit is Sh10,000, it will increase to Sh20,000.”
The Hustler Fund has grappled with a deep budget cut this financial year. The government allocated it Sh5 billion in the first supplementary budget for the current financial year, a 50 per cent reduction from the Sh10 billion it had been allocated at the start of the financial year in July.
Other than that, Ruto said there might not be need to increase the allocation, with the fund having taken off on its own.
The initial plan was to inject Sh50 billion into the fund but it has so far received Sh12 billion.
“Even the money we had committed, we do not need to add more. It will sustain itself,” Ruto said.
“If this product was what they (critics) were saying, it would not be self-sustaining as it is.”
Ruto announced payment of interest at 12 per cent for the savings held, to be effected every December 31 starting this month.
A 12 per cent return on savings is significantly higher than what top tier banks offer to their customers. For example, KCB Group offers 6.3 per cent on its Target Savings Account and Fixed Savings Account.
Absa Bank gives nine per cent return on its Digital Savings Account.
Ruto said the interest rate on Hustler Fund savings will be pegged on the T-Bills returns and gave borrowers an opportunity to withdraw 30 per cent of their savings.
“If you do not want to withdraw, after one month, we will use your savings to improve your limit,” he said, acknowledging the major cry for borrowers who said they want their limits increased.
The same improvement was announced for 1.2 million active borrowers who have accessed money from the platform between two to a dozen times.
Those who borrowed over 10 times will have their limits enhanced by 100 per cent, five times by 60 per cent and two to five times by 40 per cent.
But amid these improvements into the fund, a burning issue that emerged during the anniversary is the operating environment of hustlers running businesses.
Micro, Small and Medium Enterprises (MSMEs) Principal Secretary Susan Mang’eni said her office will hold meetings with trade officers across the 47 counties.
“I ask that we sit down from next week with all trade officers in all the 47 counties. We need to speak of how to create spaces for all the traders to do their businesses without being victimised,” she said.
Ms Mang’eni said Ruto’s administration is determined to ensure work done by small traders who operate on the streets is decriminalised.
While Hustler Fund is meant to rehabilitate borrowers condemned to negative listing with CRB, a major task for the government is how to graduate them to mainstream financing or affirmative funds.
Mang’eni explained that for those who seek to borrow bigger amounts, they have options in the Youth Fund or Women Fund. Those in manufacturing sector can engage Kenya Industrial Estates (KIE) where they can access up to Sh20 million.
However, majority of borrowers on Hustler Fund do not necessarily borrow for business. Or if they do, it is not formally used to grow their enterprise.
Even so, the platform has surpassed other lenders as noted by Cooperatives and MSMEs Cabinet Secretary Simon Chelugui.
“Research done by Central Bank of Kenya and National Treasury and Financial Sector Deepening shows over 45 per cent of Kenyans borrowed from Hustler Fund.
“It is the most performed fund currently across all borrowings in the country,” he said.
The referenced research, FinAccess MSE Tracker Survey published August 2023, notes that household use was the main reason for borrowing.
“The main reason given for borrowing from the fund were for personal or household purposes such as meeting daily expenses,” the report said.
[Additional reporting by Macharia Kamau]