New data from Kenyas State Department for Micro, Small, and Medium Enterprises (MSMEs) has shown that default rates for loans from Kenyas Hustler Fund, a government initiative which allows citizens to access credit at cheaper rates than commercial banks, now surpass 50%, as questions continue to be raised over the viability of President William Rutos flagship economic programme.
Government data has shown that more than half of Hustler Fund borrowers have defaulted on repayments totalling KSh11bn ($85mn), with the non-performing loan (NPL) ratio currently at 21%.
In his manifesto prior to the last general election in 2022, Ruto pledged to launch a Hustler Fund in a bid to offer poorer Kenyans instant loans at affordable rates. The interest rate of Hustler Fund loans is 8% annually, calculated daily at a rate of 0.02%, in a country where some commercial entities charge more than 100% in annual rates.
Some industry figures raised questions about the sustainability of the project at the time of its launch, given that central bank interest rates, currently at 12.75%, are higher than the Hustler Fund rate of 8%. Furthermore, some criticised the expense of the scheme President Ruto launched the Hustler Fund with KSh50bn ($388m) given that the Kenyan government is often at high-risk of defaulting on its external debts and has pledged to try and bring spending down.
The need to cut spending has become even more of a priority in recent months after the government was forced to backtrack on its plans to increase revenue via tax rises, after deadly protests broke out in Nairobi and other major cities across the country.
