Business

State to emulate digital lenders in going after Hustler Fund defaulters

President William Ruto registering for the Hustler Fund on November 30, 2022. (Photo: PCS)

By Alfred Onyango | Thursday, June 13, 2024

The repayment rate for the loan amount is 77 per cent, meaning that at least 11.4 billion is in default.

You risk the government coming after you in case you are sitting on an unpaid Hustler Fund loan which now stands at about Sh11.4 billion as of March.

This comes after a new approach by the state in addressing default concerns under the kitty which is above the 20 per cent mark, higher than the impairment ratio of major financial institutions.

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According to the Central Bank of Kenya, the ratio of gross non-performing loans to gross loans in the banking sector jumped to 16.1 per cent in April this year, rising from 15.1 per cent in February.

Under the new strive to address the concern, the state is seeking to adopt similar moves used by digital lenders in compelling defaulters to pay, in addition to the current daily penalty charges.

Borrowers who so far have a default period of over a year, have been receiving message alerts to repay or face fines.

The Hustler Fund was launched in November 2022, and at least 21 million Kenyans have benefited from the kitty to date.

The latest data from Safaricom's financial results for the year ended March 31, 2024, shows the fund has so far distributed Sh49.5 billion.

According to the firm, whose mobile money product M-Pesa supports the government's overdraft facility, the repayment rate for the loan amount is 77 per cent, meaning that at least 11.4 billion is in default.

The fund is a component of President William Ruto's campaign pledge to support small business owners in growing their operations, free ordinary Kenyans from shylocks, and foster a saving culture.

Over the next five years, it is anticipated that the fund, valued at Sh50 billion annually, will release over 15 million individuals from unscrupulous lenders by providing loans up to Sh50,000.

At an annual rate of eight per cent, the loan facility is arguably more affordable compared to other average lenders in the market.