The Cabinet Secretary for National Treasury and Economic Planning, Prof Njuguna Ndung’u, published new regulations to operationalize the Hustler Fund.
This marks the first step towards realizing one of the campaign pledges made by President William Ruto in the run-up to the 2022 General Elections.
The Public Finance Management (Financial Inclusion Fund) Regulations now open the door for Cooperative Societies and Savings and Credit Cooperative Societies, as well as other financial intermediaries and associations that hold funds from lenders, apply for a loan from the Fund for on-lending to individual business persons or micro, small and medium enterprises.
The Hustler Fund has been designed to innovate, develop and deploy bottom-of-the-pyramid (bottom-up) financial services and products that are affordable, accessible and appropriate for the unserved and underserved persons, including credit, saving, insurance and investment products.
The objectives of the Fund are to promote financial inclusion through expanding access to credit by persons, proprietors, micro, small and medium enterprises, Chamas, table banking groups, Cooperatives, SACCOs societies, associations and start-ups for economic growth and job creation.
The Fund is also expected to provide an alternative to millions locked out of the formal credit market as well as those who have been victims of unethical practices by other credit providers.
The Hustler fund will promote financial literacy and consumer rights as it strengthens the financial and operational capacity of informal sector membership-based financial institutions.
According to the published guidelines, the Fund seeks to improve the supply of affordable credit to micro, small and medium-sized enterprises (MSMEs), including creditworthiness-based lending, risk pricing, business and financial management skills, and cost of doing business.
The Fund will ensure that its products and services are commercially viable, rapidly scalable at a reasonable cost and low operational risk without distorting the market.
The Fund is tailored to address the low participation of the non-formal wage workforce that includes informal sector entrepreneurs and workers, smallholder farmers, pastoralists, fisher folk and other self-employed in health insurance and retirement benefit schemes.
An intense battle for control of this credit market is expected to play out between commercial banks and Saccos, each making an appeal mostly to the informal sector-which is locked out. The Fund will leverage on existing commercial infrastructure, including mobile payments platforms and financial institutions, including agency, co-financing and on-lending partnerships.
This is provided that such partnerships are not exclusive or preferential, is technology neutral and do not confer a market advantage to any partners over competitors.
The Financial Inclusion Fund, which is capitalized at a maximum of KSh 50 billion, will source its cash through allocations made by parliament, income from investments made by the Fund, interest income from loans disbursed, grants and donations as well as other income sources approved by the Cabinet Secretary.
According to the new regulations, a financial intermediary-which includes Saccos and Cooperative Societies entering into a lending agreement with the Fund under regulation 17, may provide matching funds of at least the amount as may be determined by the Fund’s Board.
Saccos and cooperative societies that access these funds will be able to lend to their members at an interest rate that will be determined by the Board. Where marching funds are provided, the interest rate charged will be lower than in a situation where there are no matching funds.
This Fund will be managed through an Advisory Board made up of a non-executive Chairperson appointed by the President; the PS National Treasury, the PS of the State Department responsible for micro, small and medium enterprises; the PS of the State Department for trade, the Attorney-General, two other persons, not being public officers, who shall be appointed by the Cabinet Secretary responsible for matters relating to micro, small and medium enterprises; and the Administrator or CEO of the Fund, who shall be the Secretary of the Board and an ex-official member.
The Chairperson and members of the Board appointed will serve for a term of three years but shall, subject to satisfactory performance, be eligible for reappointment for one further term of three years, for a maximum of two terms.
The Fund will have a secretariat to be headed by a Chief Executive Officer, who will be appointed by the Cabinet Secretary responsible for matters relating to micro, small and medium enterprises upon recommendation by the Board.
A person appointed as a Chief Executive Officer will hold his office for a term of four years, subject to renewal for a further term of four years.
Applicants will be able to access amounts of between 500 and 50,000 at a repayment interest of 8 per cent.
In a press statement, the CS for Cooperatives, Micro, Small and Medium Sized Enterprises, Hon Simon Kiprono, said that following the presidential pronouncement that the Hustler Fund will be launched on November 30, 2022, his Ministry has established a technical committee to plan, design and implement the Fund’s products that will make the election pledge a reality.
“As you are aware, the National Treasury published the regulations that will govern the Fund. They have since been taken for public participation and which ended a few days ago,” said CS Kiprono.
He said the Hustlers Fund is revolutionary as its objective is to make affordable credit to sections of the population that have been left behind for far too long.
“The Hustlers Fund will lend to businesses at 8 per cent a year, the lowest interest ever charged in Kenya. As a result, citizens will be able to start or boost their hustles without being crushed by predatory lenders, shylocks and over-the-roof interest rates,” said CS Kiprono.
The Hustler Fund will provide affordable credit in four products, namely Personal Finance, Micro Loan, SMEs Loan and Start-Ups Loan
On November 30, the President will launch the Personal Finance product. The other products will be launched at a later date.
In the Personal Finance product, between Sh500 and Sh50,000 will be available for lending. It will be repaid in 14 days, and the 8 per cent interest will be calculated pro-rata or on a daily basis.
The other revolutionary aspect of the Fund is the saving component.
Every time one borrows, 5 per cent of the amount goes to a saving scheme where the money earn interest.
In addition, for every Sh2 saved, the government adds Sh1. This will boost national savings and also provide those who borrow from the Hustlers.
Unlike many financial products that require a lot of paperwork, guarantors and collateral, among other hurdles, borrowers will face no such roadblocks. The finance will be accessed on a mobile phone.
The Fund is working with the leading mobile network operators – Safaricom, Airtel and Telkom – to deliver the funds. They are also setting up a joint call centre that will disseminate information and respond to issues and questions of borrowers.
“We wish to inform the public to disregard all forms of communication inviting them to register for the Fund on websites or phone numbers. No registration is required and all that will be required is to dial a code. There will be no intermediaries, it will just be the Hustler and his or her phone,” warned the CS
The Fund will become active when the President launches it on November 30.
The CS dismissed media reports claiming that loan defaulters will be fined up to KSh10 million.
“There is no such thing. The penalties outlined in the regulations target Fund officials who may embezzle or misappropriate the funds,” said the CS.
