The National Treasury has cut the budget for the Hustler Fund by Kshs 5 billion in the latest budgetary changes, raising questions on the economic sustainability of public credit plan.
Consequently, with the move, the allocation for the popular, low interest, unsecured loans will drastically drop from the Kshs 10 billion that was initially set aside by the Treasury Cabinet Secretary, Njuguna Ndungu at the beginning of the financial year 2023/2024.
Therefore, this new budget makes it the lowest that has ever been assigned to the Hustler Fund, formally known as the Financial Inclusion Fund.
When President William Ruto launched the fund in November 2022, Treausry allocated it Kshs 20 billion, with the slash signaling a major shift.
“I think it is just in line with the austerity measures that the government is taking,” Elizabeth Nkukuu, the Acting CEO of the Hustler Fund said.
Reasons for the budget cut
On the reasons why the budget was halved, it was noted that it was due to the high number of defaults on the unsecured loans by Kenyan borrowers.
Also Read: CBK Explains Why Tanzania, Uganda Are Beating Kenya’s Economy
In August 2023, the default rates on the fund hit Ksh3 billion. These defaulted payments were at a much higher rate than those at commercial banks, saccos and microfinance banks.
ADVERT
Moreover, it was noted that out of the Hustler Fund’s Ksh10.2 billion worth of loans handed out by August 2023; 29 percent had not been serviced by the borrowers by the agreed time.
The President praises the Hustler Fund
Notably, the reduction of the hustler fund budget comes days before the financial inclusion fund hits its one-year anniversary. Ruto launched the fund on November 30, 2022.
Additionally, President Ruto spoke on the Hustler Fund during the opening of the East Africa Device Assembly Kenya in Mavoko, Machakos County on October 30, 2023.
“The Hustler Fund has been able to benefit millions of Kenyans, from all walks of life, especially, and consistently, and conveniently and repeatedly lending billions of shillings in unsecured loans and recovering it without need for drastic, expensive, and time-consuming procedures,” the President stated on the fund, further noting that it was still helping the hustlers in the country.
Notably, one of the reasons why the hustler Find remains an attractive means of acquiring loans by Kenyans is because of the unsecured nature of the credit facility.
Also Read: Features of Newly Launched Kenyan Smartphones
Unsecured implies that the loans do not require backing on any collateral, for example title deeds. Additionally, the Financial Inclusion Fund offers loans that amount up to as low as Kshs 500.
According to official data, the state has so far disbursed Kshs 36.8 billion in personal loans since the launch of the fund.
