The news :
- Default on Kenyan-government-backed Hustler Fund reaches Sh3 billion ($20 million).
- The Sh50 billion ($346 million) fund was launched in November 2022 to provide affordable loans to small businesses in Kenya.
- So far, Sh33 billion ($228 million) has been lent out. However, Sh3 billion is still outstanding.
Hustler Fund is a digital financial initiative by the Kenyan government to lift Kenyans out of poverty through the bottom-up economic model.
The fund gives loans to Kenyan businesses at an 8% interest rate, making it affordable. The loans are short-term loans with Sh500 being the minimum and Sh50,000 being the maximum.
However, default on loans is higher than those at commercial banks, savings and credit cooperatives (SACCOS), and microfinance banks.
According to BusinessDaily, 29% (Sh3 billion) of the outstanding Sh10.2 billion worth of loans are "deemed to be portfolio-at-risk, implying it has not been serviced by the borrowers as per the agreed schedule."
This percentage pales in comparison to that of commercial banks, saccos, and microfinance banks. For Saccos, the percentage of portfolio-at-risk or non-performing loans (NPL) is 8.6% as of December 2022.
For commercial banks in Kenya, the NPL rate is 14.5%, while the NPL rate for microfinance banks is 23%.
The Kenyan government has introduced credit scoring to reduce the rate at which people default on loans from the Hustler Fund. The government will link existing affirmative action funds to the Hustler Fund so that defaulters will not get access to more funds until they improve their credit scores.