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By Victor MUJIDU
Over 1.2 million Kenyans will be eligible for quick loans and other credit facilities from the Hustler Fund kitty owing to their diligent saving efforts.
Cabinet Secretary for Co-Operatives and Micro, Small, and Medium Enterprises Simon Chelugui said that individuals who meet the prerequisites will be granted such loans through the government backed financial institution, the Kenya Development Corporation Ltd (KDC) and other micro lenders or MFIs.
“I have about 1.2 million people that I can hand over to you (KDC) to the circus and to all AMFIs to give them graduation funds, and this is not a mimic but an enhancement of what we have come up with from micro, small, and medium enterprises,” said Chelugui on the sidelines of the launch of Supporting Access to Finance and Enterprise Recovery (SAFER), on Monday.
KDC is a Development Finance Institution which was established in 2020 to merge the operations of Industrial and Commercial Development Corporation (ICDC), Tourism Finance Corporation (TFC) and IDB Capital Limited.
The institution plays a catalytic role in Kenya’s socio-economic development by providing long-term financing and other financial, investment and business advisory services.
About million loan defaulters previously enlisted on various Credit Reference Bureaus (CRBs) will now be qualified to borrow from the kitty – administratively known as financial Inclusion fund, a loan project led by the Kenyan government which provides instant loans to Kenyan citizens upon request.
“Let’s not forget where we came from, because three years ago, over 10 million Kenyans were listed on CRB, and today we have rehabilitated seven million of them back to financial status, and they are no longer listed,” said the CS.
“I am proud to say that the number of tickets issued by Hustler Fund is from 500 shillings all the way to 50,000,” he added.
President William Ruto announced last February an extension of the borrowing cap for six million Kenyans of the 18 million who had opted into the credit facility.
In the announcement made during the 50th anniversary of the Kenya National Police Sacco, the President said some of the six million Kenyans would access double their current credit while others receive up to 80 percent raise from their current credit limit.
During launch of the fund in 2022, Dr. Ruto said Groups, Chamas, and cooperatives will be eligible for credit facilities of up to Kes10 million, while Saccos under the firm grip of their sector regulator, the Sacco Societies Regulatory Authority (SASRA) would access between Kes10 million and Kes100 million from the Hustler Fund.
As of December last year, the Hustler Fund had disbursed more than Sh41 billion to over 22 million Kenyans since its inception, according to the data from the government.
The massive borrowing came as a result of the State Department of Micro, Medium, and Small Enterprises (MSMEs) announcing plans for an MSME Fund targeting small and medium traders.
Despite the borrowing, the government has managed to create savings worth billions, with CS Chelugui commenting that the Hustler Fund project is essential in empowering MSMEs to manage their cash flows effectively and pursue growth opportunities.
“We have social savings of Ksh2.7 billion, and that social protection issue is another angle that you need to look at, so don’t look at the Hustler Fund in terms of 500 shillings, but rather, look at it holistically and what it is able to generate,” he said while addressing the press.
Defaults rates still high
The value of Hustler Fund loan defaults stood at nearly Sh10 billion in the first 11 months since the launch of the micro, small, and medium enterprises (MSMEs)-focused credit facility in November last year.
New disclosures from the National Treasury put the overall repayment rate of loans disbursed via the fund at 73 per cent revealing significant impairments.
The Ministry of Co-Operatives and Micro, Small, and Medium Enterprises stated that the process of repaying the borrowed funds is proceeding as planned, albeit with the intent to spur financial growth.
“I know we need to enhance the speed of collection and repayment and also reach out and enhance the ticket above, but again, it’s a journey. We’ve just had one year, so we are now going into our second year.
“By the time we are hitting our third year, we have built enough history, and we have built enough profile to be able to improve. It’s a dynamic project. It’s a dynamic product.”