Available through USSD code and mobile application, the Financial Inclusion fund, popularly known as the Hustler Fund, is an exemplification of how to combine Financial Technology with Micro-Credit at scale.
While most analyses and criticisms of the borrowing scheme focus on its ability (or purported lack thereof) to aid in business growth, there are benefits to be gleaned by the National Government from this Fund.
In Kenya’s banking sector, the combination of Micro-Finance Institutions (MFIs) with FinTech firms through the acquisition of the former by the latter is an ongoing trend.
This is fuelled by the desire of MFIs to shift to digital platforms and of FinTech firms to become banks while staying on the right side of regulation, despite not having the high capital requirements to acquire formal banks.
Read: Hustler Fund Set To Lose Ksh22 Billion In Costs Every Year
Out of every Ksh 100 borrowed through the Hustler Fund, Ksh 95 will be received by the borrower, Ksh 3.95 will be deducted from the borrower’s pension account and Ksh 1.05 will be deducted from the borrower’s savings account. Effectively, the Hustler Fund functions as a digital pension and savings payment platform.
Moreover, relatively low-interest rates of about 8% and a large loan book of about Ksh 19 billion mean that this fund will provide competitive loans and subsequently have significant Interest Income, earning Government revenue essentially as a Micro-Finance Bank.
Therefore, this borrowing scheme’s benefits are not limited to increasing the availability of credit, which will help Kenyan businesses to grow.
The Hustler Fund also functions to provide additional much-needed revenue for the Kenya Kwanza government in the form of Interest Income on competitively priced loans, while using Financial Technology to boost National Pensions and Savings.
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