How the Hustler fund exposed the realities of Kenya's two cities

If you drive slowly on the Southern bypass towards Mombasa Road and look to your left as you pass Kibera, you can see Kenya's "Tale of Two Cities."

The foreground is Kibera shanty town with its overcrowded mud huts, no visible amenities, the only evidence of modernity being the numerous TV antennae on top of each sad looking structure. Look in the background and you notice the other Nairobi, the ultimate evidence of Kenya's modernity.

You will see the spires on top of the Upper Hill skyscrapers, screaming their height to the world like Ozymandias.

These contrasting faces of Nairobi, which is representative of greater Kenya, is reflective of some of the ongoing debates on the Hustler Fund. Conceived by the UDA administration, the 50-billion-shilling fund, which is supposed to grow to Sh250b was supposed to be UDA's game changer. It was supposed to provide affordable credit to hustlers whose access to credit had been compromised by the high interest rates in the market.

Kenyans do not know that micro-credit is the most expensive credit in the country. Because much of it is unsecured, the risk to the lender is very high, with defaults rates stretching up to 50 per cent. Consequently, to mitigate the risk, micro-lenders charge high interest rates up to 40 per cent per annum, which leads to high default rates for those that borrow to finance businesses with low returns or for consumption.

But while many micro-enterprises recognise that micro-credit is expensive, it is nonetheless the engine behind the survival of their businesses hence the mushrooming of numerous micro finance lenders. The UDA government recognised this need and the challenges wrought by the high interest rates.

During the heady days of the campaigns, the party had promised that the loan would be interest free to enable many hustlers repay the borrowed funds without complications.

Wisdom, however, prevailed and the loans have now been issued at a rate of eight per cent which is way lower that what is available in the market. If the fund had been offered interest free, it would have been an unsustainable drain on the exchequer.

But what shocked many Kenyans was the limits of the loans; from a minimum sum of 500 shillings to a maximum 50,000 shillings. For many Kenyans, particularly the middle class who monopolise public opinion, this was a scandal. How was anyone supposed to carry out any enterprise with 500 shillings!

Even former Prime Minister Raila Odinga weighed in, arguing that only a minimum 5,000 shillings made sense in our business environment. The position taken by the middle class and articulated by Hon Odinga amongst others, exhibits the reality of Kenya's two cities.

Many of us cannot imagine the level of poverty that characterises many Kenyans, especially the urban poor. We do not understand the "kadogo economy" at which they operate. For many of these struggling to survive on a "dollar a day", the figures being offered by the Hustler Fund make absolute sense.

Cheap credit of 500 shillings enables one to buy green maize, hire or buy a roaster and commence a micro business.

They may not take much home, but without this access they were at the mercy of the streets. In many of the slums, the biggest business is food. The investment required to provide the service is meagre, in the eyes of us in the privileged classes.

But for the lady who just needs a packet of Unga, a sufuria and cups, some charcoal and sweetener to commence her uji business, the Hustler Fund is a game changer. Even more important, faithful repayment enhances one's credit limit, hence ensuring more funds to invest in increasingly bigger enterprises. Doubtless, the Hustler Fund may not make millionaires of hustlers, not with investments of 500 shillings. But that was never its intention.

It was meant to give a hand to the millions of long-suffering hustlers who believed in the promise of the UDA government. Used well, it can kick many out of absolute debilitating poverty. Even as it resolves its teething regulatory and operational issues, one hopes that it succeeds, for it is only when the poorest amongst us get a chance for regeneration that we can have a sustainable nation.