As the Hustler Fund marked 100 days since its unveiling, over 15.7 million borrowers have successfully applied and been awarded loans of between Ksh 500 and Ksh 3,000 every time they borrowed.
Of these, 6.3 million customers were repeat borrowers. Over Ksh 21 billion has so far been borrowed, of which the government says more than Ksh 1.07 billion has been deposited to the savings accounts of the borrowers.
However, over 800 000 hustler fund borrowers are said to have defaulted on paying back their loans within the stipulated time, leading to the freezing of their accounts.
Details from the Ministry of Co-operatives show a repayment rate of just over 61%. This includes borrowers in counties in arid and semi-arid areas defaulting that registered default rates of more than 70%.
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Ministry data shows that of Ksh 19 billion due for payment, Ksh 11.8 billion had been repaid, leaving a balance of Ksh 7.4 billion.
According to the rules of engagement, a borrower who fails to pay back within 14 days loses points from their credit score.
They are, however, allowed an additional 15 days to service the loan, during which the interest rate rises to 9.5% from 8% p.a.
Should they default beyond 30 days, the loanee loses all credit scores, and their account is frozen – meaning they cannot borrow any more until they clear their debt in full.
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According to Simon Chelugui, the cabinet secretary for cooperatives and MSMEs development, the defaulters’ condition is understandable considering the economic situation in the country, especially drought.
He added that, for now, the government is looking for ways to bring back the defaulters.
Out of the 15.7 million borrowers, five million hail from 5 counties, mainly in the urban areas of Nairobi, Kiambu, Nakuru, and Machakos.
Further, analysis of repayments shows an average repayment rate of 61%, which is lowest in arid and semi-arid counties such as Wajir, Mandela, Marsabit, Garissa, and Turkana counties, which report a default rate of more than 60% each.
The ministry is preparing to roll out the second lending phase to micro enterprises owned by individuals and groups.
These will access loans of between Ksh 10,000 and 200,000, repayable over a period of between 3 and 12 months.
The second phase of the fund targeting small groups and associations has been signed out for regulatory approval. It is set to be unveiled in March, raising the loan limit to 2.5 million.
“We are going to engage in financial rehabilitation. The existing groups with non-performing loans will be given a lower percentage of what they qualify for because we want to create access while managing risk. We are not excluding any member or group”
said Chelugui.
At the rate of 8% p.a, the second phase will borrow heavily from SACCO, the minister saying the government will employ the SACCO model in terms of members guaranteeing loans for each other.
He added that the government is going to invest the savings at rates of over 10%.
“We want to build a savings portfolio so that we can lend in the manner of SACCO,”
he said.