The government is planning loan
downgrades and targeted recovery
strategies as some of the ‘radical’
measures to deal with those who
have defaulted on their Hustler
Fund loans for two years.
According to the State Department of Micro Small and Medium
Enterprises (MSME) Development
Principal Secretary, Susan Mang’eni,
the fund has already established a
credit rating system that will help
in tracking down defaulters.
The rating scale ranges from A
(excellent) to C3 (poor). Currently,
six million Kenyans fall between A
and B ratings, making them eligible
for higher loan products.
“But now that we have achieved
the credit rating, which was one of
the key expected outcomes, we now
know who is who and their default
status.’’
Mang’eni revealed that the
punishment defaulters, particularly
borrowers rated C2 and C3, who borrowed in the initial months but
failed to repay, she said that measures include loan downgrades and
targeted collection strategies.
“Of what do we do to these people, for example, rating C3, who
have had our loan outstanding even
for two years? We have been forced
to come up with some very radical
measures. In doing so, we have to
note that since it’s rehabilitation,
we try to incentivize where it fails,
then we see how to make sure this
works.”
She noted that the fund has
started a conversation with the six
million Kenyans who reported a
positive credit rating (A and B ratings) to access other credit products
and integrate them into banking
systems.
She further revealed that all 25.3
million Hustler Fund beneficiaries
have been subjected to a credit rating system as a way of enhancing
financial discipline.
“A pilot programme targeting 1.5
million top-tier borrowers resulted in the introduction of the Bridge
Loan product. Since its launch two
months ago, 210,000 Kenyans have
enrolled, with total disbursements
reaching Sh1.67 billion. Repayments currently stand at Sh1.054
billion, demonstrating strong liquidity,” said Mang’eni.
This comes at a time when
President William Ruto’s flagship
project is struggling to get back
Sh12.5 billion in loans yet to be
recovered as of February 24.
So far,
Sh63.4 billion had been disbursed
to about 25.3 million Kenyans as
of Monday morning, and then the
total repayment from that portfolio
was Sh50.9 billion.
Data submitted to the National
Assembly’s Committee on Trade, Industry, and Cooperatives show that
the fund has achieved long-term
savings of 70 per cent amounting
to Sh2.9 billion.
The short-term saving, on the
other hand, is Sh460 million, while
voluntary saving is Sh369 million.
Submissions before the James
Gakuya-led committee show that
the second hustler fund product—
the group loan scheme—has seen
876,529 Kenyans express interest
in forming lending groups.
However, only 14,601 groups
have completed registration and
received loan limits, with total
disbursements standing at Sh196
million.
Challenges in digital on boarding have slowed adoption, but
ongoing reforms aim to streamline
the process.
Additionally, the Ministry of Cooperatives and MSMEs
Development is requesting Sh500
million in the next budget to develop an internal digital platform for
managing the Hustler Fund.
This system will facilitate real-time reconciliation, reducing reliance on private service providers.
At the session, the Cabinet Secretary for Cooperatives and Micro,
Small, and Medium Enterprises
(MSMEs) Development, Wycliffe
Oparanya called for additional
funding to enable state agencies to
effectively fulfill their mandates and
complete ongoing projects.
He noted that several key priority
areas in the Budget Policy Statement remained unfunded and urged
the committee to support the State
Department during the 2025/2026
budget allocation.
Among the critical unfunded
areas in the State Department for
Cooperatives, CS Oparanya highlighted a funding gap of Sh200
million for mobilization across
eight value chains, Sh138 million
for promoting good governance
and accountability in cooperatives,
and Sh4.1 billion for refurbishing
primary coffee handling infrastructure, including the production and
multiplication of coffee planting
materials.
In the State Department for
MSME Development, the Financial Inclusion Fund (Hustler Fund)
requires an additional Sh8 billion
for credit disbursement and Sh400
million for recurrent expenditure.
Additionally, the Uwezo Fund
needs Sh168.6 million for Constituency Uwezo Fund Management
Committees and Sh450 million for
re-engineering the fund.
