The hustler fund celebrated its one-year anniversary this month. On Jamuhuri Day, President Ruto also highlighted the significant milestones of the fund, seeing it as an initiative to correct market failure.
Borrowers on the fund have saved KES 2 billion with a repayment rate of 75% nationally. The Hustler Fund has grown to become the largest financial inclusion program in Kenya, disbursing KES 42 billion to more than 21 million borrowers.
The numbers are rosy, but do we really understand the mechanisms of how the hustler fund works? Why is one person’s limit KES 500 and another KES 10,000? What are interest rates? Do you know you save for your retirement each time you borrow?
In partnership with the banks, the government used the banks’ data on Kenyan transactions to determine the different limits. Although within the year, Kenyans were complaining that, though they transacted multiple times, the limit did not increase.
“We are looking into improving the process so that every four months, the limits will be reviewed and possibly increased for consistent borrowers,” said the acting CEO of the hustler fund, Elizabeth Nkukuu, at an interview.
Apart from borrowing, the fund is also meant to build a culture of savings for both short-term and long-term investments. Each time you borrow from the fund, 5% of the amount is deducted to go into your savings.
Only 30 percent of the total money saved is accessible. The remainder, which is 70 percent, is saved for the long term up to the retirement age of 60 years.
If you borrow KES 1,000, you don’t get the full amount; 5 percent, which is KES 50, is retained for your savings. KES 15 goes to your short-term savings, while KES 35 goes to your long-term savings.
Anytime you borrow, you are given a maximum of 14 days to repay at a rate of 8 percent per year, calculated per day. If you exceed the set dates, the interest goes up to 9.5%, and you are termed a defaulter.
Amidst the noble aim of enabling ‘hustlers’ to access credit while still saving, questions of governance have come up. As it stands, the hustler fund is semi-autonomous, meaning it possesses a degree of self-governance but is not entirely independent and operates within a larger system or framework of the capital markets and pension regulations.
When the fund was first rolled out, questions of who would govern it arose. One year later, parliament established a board and inaugurated some members along with a secretariat.
According to the regulations, parliament shall allocate a maximum of KES 50 billion to the fund every year. It shall also generate income from interest, charges, and penalties.
Other sources are income from the fund’s investments and grants, donations, and gifts to the fund.
