Hustler fund loan defaults have hit Sh. 3 billion. Out of the Sh. 10.2 billion loans that have been disbursed, at least 29 per cent is currently considered as being at risk. This translates to about Sh. 2.9 billion.
This means that the Hustler fund currently has the highest defaults in comparison to commercial banks and microfinance institutions.
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In contrast, the overall ratio of non-performing loans to loan book (NPL ratio) for commercial banks stood at 14.5 per cent at the end of June 2023.
“Out of the Sh. 33 billion that has been lent out, the outstanding loan book is about Sh. 10.2 billion; remember these are short-term loans so they get repaid pretty fast,” Moses Banda, the President’s adviser on financial inclusion told a local daily.
“Out of the outstanding amount, 29 percent is not performing on time. So, about Sh. 7.9 billion of the outstanding amount is performing on time. Just like any other lending, there will always be challenges of non-performing loans.”
The fund was one of President William Ruto’s campaign pledges. The fund has experienced high default rates from since it’s inception in November 2022.
As at March 2023, details from the Ministry of Cooperatives showed a repayment rate of just over 61 per cent, with borrowers in some counties in the arid and semi-arid areas defaulting at more than 70 per cent.
A borrower currently has up to 14 days to pay back their loan. A borrower who fails to pay back within 14 days loses points from their credit score. They are however allowed a further 15 days to service their loan, during which the interest rate rises to 9.5 per cent from 8 per cent.
Should they default beyond 30 days, a loanee loses all their credit scores, and their account is frozen, meaning they cannot borrow any more money until they clear their debt in full.
