With the government Hustler Fund loan payments due, at least publicly, for the first time ever since its launch in 2022, financially stretched borrowers may be concerned about the consequences of missed payments.
The end of the ‘grace period’ means the beginning of potentially harsh consequences for Hustler Fund loan borrowers who have been considered delinquent and default for failing to repay the Financial Inclusion Fund even after being hit with high late fees and credit history damage.
Around 13 million Kenyans have Hustler Fund loan debt, amounting to Ksh7 billion, which they have refused to pay back, according to Elizabeth Nkukuu, the Chief Executive Officer of the Financial Inclusion Fund, who says that most of them borrowed between Ksh500 and Ksh1,000 over a year ago and continue to transact an average of Ksh21,000 per month on their mobile wallets.
Therefore, the government is looking to begin debt collection proceedings and is set to start deducting money directly from the borrowers’ M-PESA accounts, like Fuliza, to recover the loan. They will also be subtracting airtime to pay off the debt.
“What we are looking at is to get money from their M-PESA or airtime, and we are in the process of considering appropriate legal provisions,” CEO Nkukuu told the National Assembly’s Special Funds Account Committee on Wednesday. “The beauty of this Fund is that we have the phone numbers and the unique identifiers of the defaulters, like the national IDs.”
Responding to questions raised by some Members of Parliament (MPs) in the committee, Nkukuu said that the defaulted Ksh7 billion was part of the Ksh12 billion principal allocation by the National Treasury and that 1,304 other persons had borrowed Ksh1.7 billion without registering for the Fund.
Here are some questions and answers about Hustler Fund loans:
What is the Hustler Fund in simple terms?
The Hustler Fund is a digital financial inclusion loan offered by the Government of Kenya through the Financial Inclusion Fund, which is its administrator. It has four different loan products: Personal Finance for various personal expenses, from debt consolidation to major purchases, and Micro Loans, SME Loans, and Start-up, categorized as short-term business loans for Hustler groups.
The Fund, launched on November 30, 2022, was created primarily to facilitate the flow of credit to businesses and individuals who may not have access to traditional financing from banks and credit unions.
“The Government established the Financial Inclusion Fund, popularly referred to as Hustler Fund, to help cushion and mitigate financial shocks for this informal sector, which accounts for more than 80% of the workforce and contributes over 33% of the Gross Domestic Product (GDP),” the administrator of the Fund says, listing the main pillars within the financial inclusion fund as affordable credit, competitive savings and pensions products, comprehensive insurance solutions, access to affordable housing, market linkages and financial literacy.
How do I apply?
You will apply for your loan directly through your mobile phone, using your registered SIM card, by dialling *254#. Hustler Fund supports Safaricom, Airtel, and Telkom networks because loans can be deposited on M-PESA, Airtel Money, or T-Kash.
You can apply manually via the said *254# USSD or online on the M-PESA app in the Hustler Fund mini app. It’s quicker to apply online.
As per the PFM Act, the Public Finance Management (Financial Inclusion Fund) Regulations, 2022, the legal structure that formed Hustler Fund, the eligibility requirements are as follows;
- a person must be a Kenyan citizen of 18 years and above
- a person must have a valid national identification card (ID)
- a person must have a registered SIM Card and be an active subscriber of the applicable mobile money service
- a person must have used the SIM Card for at least three months from the date of registration on Hustler Fund
For their part, Hustler groups, micro, small, and medium enterprises, and cooperative societies must register with the relevant government institution before applying for Hustler Fund loans.
How much can one borrow from the Hustler Fund?
Depending on your credit score, you could borrow from as little as Ksh500 to a maximum of Ksh50,000. An exception to this limit is if a customer borrows the other loan products for Husler groups, which are Micro Loans, SME Loans, and Start-up loans: in such a case, the participant may borrow up to Ksh1 million.
“The Hustler Fund Group loan product allows groups to apply for loans ranging from Kes 20,000 to Kes 1 million. The interest rate is 7% per annum on reducing balance and 1.5% default rate. The repayment period is six months from the disbursement date,” outlines MSEA (Micro and Small Enterprises Authority), the govt body tasked with formulating and reviewing policies and programs for Micro and Small Enterprises.
Out of the total approved loan amount on disbursement, Hustler Fund shall send 95% to your Mobile Money wallet, and the remaining 5% will be channelled to the savings Scheme. There, it is split into 70% for long-term and 30% for short-term savings accessed only after 365 days from the date of disbursement when the loan is fully repaid.
What is the current interest rate on government Hustler Fund loans?
If you’re looking to borrow Hustler Fund, today’s current interest rate is 8% per annum, increasing on a 1.5% default rate for late payment. This means that in the event of default by the customer (non-payment within 14 days from the date of disbursement), interest shall accrue at the rate of 9.5% p.a. with effect from the 15th day.
The interest applied to the current unpaid principal amount shall then accrue daily from the date of loan disbursement until the 365th day or any other earlier date upon which the customer may have fully repaid the loan.
Borrowers owe less interest and pay more towards principal when they make their loan payments on time.
What is the difference between Hustler Fund and other loan facilities like Mshwari?
The obvious difference between Hustler Fund and private loans such as Mshwari, Fuliza, and bank loans is that Hustler Fund is offered by the Kenyan government, while private loans are provided by private lenders.
Government-backed loans work very much like commercial loans offered by private lenders, except that they are funded or guaranteed by the government. For this reason, Hustler Fund has lower interest rates at 8% compared to Mshwari’s 9%, and borrowers enjoy repayment flexibility without harsh penalties – Hustler Fund cannot take you to national credit bureaus or CRBs.
Even though all lenders base their loan qualification on credit scores, Hustler Fund doesn’t consider your total monthly gross income, monthly expenses, or debt-to-income ratio to assign you a loan limit.
Furthermore, M-Shwari Terms & Conditions allow the administrators of the Fund, NCBA and Safaricom, to hold your funds in your Mshwari Deposit Account as collateral and security for any amounts outstanding and due. Fuliza too can deduct all due overdrafts immediately money is sent to your M-PESA account. Hustler Fund on the other hand is currently unable to access customers’ mobile money accounts directly, hence unable to make direct deductions to settle defaulted loans. That is why the CEO has said they are in the “process of considering appropriate legal provisions.”
Finally, the Hustler Fund is needs-based and supposedly exists for the public good, contributing to broader economic stability, while most private lenders are there for profit.
