President Ruto’s campaign was anchored on the promise of a new fiscal order that would address unemployment and lack of opportunities for youth. It is in this regard that affirmative actions such as the highly anticipated Hustler Fund came about. Ruto’s Kenya Kwanza coalition pledged to enable access to cheap credit by micro and small enterprises. Traditionally or as is right now, banks and other lenders charge outrageous interest rates because of the high risk of default associated with these borrowers.
What is Hustler Fund?
The Hustler Fund is a prospective credit access policy of the ruling coalition by President Ruto. This initiative was an integral part of Ruto’s campaign manifesto and is now set to be rolled out from December 1st.
The Hustler Fund will be a government-controlled fund where Ksh250 billion will be directly pumped into the economy over a period of five years. The objective of the funds will be to revive the economy by providing free or cheap credit to the average Kenyan such as ‘Mama Mboga’, ‘Boda boda’, and small/micro business owners.
It especially pivots on Kenyans working in the informal sector who contribute 85 percent of non-farm jobs, which currently translates to 15 million out of 18 million of the total workforce. For such a huge number, it is unfortunate that the private sector is sometimes reluctant to offer them loans, or charge them high-interest rates of up to 1000 percent per annum.
What is the Statutory Framework of the Hustler Fund?
During the campaign, Kenya Kwanza had exerted the idea that the Hustler Fund would be an interest free loan. However, there have been changes in this post-election period. The government announced that the Hustler Fund will charge a relatively fair interest of 8% per annum to borrowers.
Important to note also is that the Hustler Fund will also be used as a savings vehicle. The government will put in place a bountiful incentive scheme where it would top up members’ contributions on a 2:1 basis. This means that for every Ksh2,000 saved, the government will match up an additional Ksh1,000 to your total savings.
“All borrowers on this platform will also participate in a short-term savings plan and long-term pensions program. Every saving made by borrowers on this platform will be matched by the government of Kenya on a 2:1 ratio to a level to be determined by the program,” the president remarked last month during the Mashujaa Day celebrations.
The roll out of the fund will take place in four phases:
- Identifying Kenyans in small enterprises through physical and digital platforms.
- Grouping potential beneficiaries in saccos, financial groups and societies to enhance mainstreaming of the fund with efficiency.
- Rigorous training of the entrepreneurs to build their capacities before they can access the fund.
- Distribution of the funds to potential beneficiaries which will provide start-up and growth capital for small businesses.
Who Qualifies for the Hustler Fund?
President Ruto has time and again reiterated his passion towards ‘Hustlers’. He has maintained that the overall intent of the fund, as promised, is to cushion small-scale traders. These small and micro business owners will be the major beneficiaries of the fund. Only individuals who save with the Hustler Fund will be given access to credit. The fund is free of any gender or age limitations. Recipients of the fund however, need to be managing or planning to set up a small or medium enterprise.
During the campaign season, there were suggestions that beneficiaries would be required to join cooperatives, Saccos, and chamas to access loans. This was to ensure that the chamas or cooperatives will hold collateral for the loans issued to its members.
However, cooperative CS, Simon Cheleugui, during his vetting said that the second phase of the rollout will include grouping the hustlers in saccos, financial groups and societies to enhance mainstreaming of the fund with efficiency.
Chelugui noted that some potential borrowers of the hustler endowment have already grouped themselves in the existing financial establishments.
“Some of them are already grouped, they are already in various cooperatives and we will group those who are not in the groupings,” said Chelugui.
What Are The Loan Limits for Hustler Fund?
Beneficiaries of the Hustler Fund will be able to access loans ranging from Sh500 on the lower end and capped at Sh50,000 on the higher end at an 8% interest rate per annum.
Critics have argued that this amount may not necessarily be enough to set up a new business in the current prevailing economy, but can accelerate/expand an already existing one.