Economist Mohamed Wehliye has weighed in on the Hustler Fund credit facility saying the Sh50,000 limit is too small to make an impact.
He demystified the notion that the amount is way better than Fuliza and other mobile lending facilities saying the Hustler Fund loans are meant for expanding or starting new businesses.
"I see folks comparing it with Fuliza and other mobile lending facilities but these are pre approved overdrafts that hustlers use to manage liquidity. You can't borrow from Hustler Fund on a daily basis like you borrow from Fuliza," Wehliye said.
A statement from State House released after President William Ruto held his second Cabinet meeting on Tuesday said the loan limits will be a minimum of Sh500 up to a maximum that will be determined by the borrower’s credit score and capped at Sh50,000.
The statement said the Sh50 billion Fund is expected to open up affordable credit facilities for the majority of Kenyans who had previously been locked out of the credit facilities.
"The fund is structured with four products namely Personal Finance, Micro Loans, SME Loans and Start Up. As a first single digit credit product in the country and the region, the loan interest rate will be capped at 8 per cent per annum computed on a pro-rated basis," the statement added.
But Wehliye said the interest rate on the loans is too high. He said it should have been capped at 5 per cent.
"The 8 per cent is the ideal indicative market rate for short-term lending (90 days) when inflation is at optimal level supporting sustainable growth," Wehliye said.
His sentiments have been echoed by other critics of the fund who argued that Sh50,000 will do little to help ordinary Kenyans under the prevailing inflation.
They said a huge chunk of the money will go into payment of fees and levies especially for those who will be starting new businesses.
A new business requires a Single business permit, fire Clearance Certificate, Advertising Signage, Health Certificate, and Food Hygiene.
