Concern as Kenyans borrow Sh18.4bn from government funds, fail to repay
Kenyans are yet to repay Sh18.4 billion they borrowed from the government's three revolving funds.
What you need to know:
- MPs are already calling for the Hustler Fund to be wound up after it emerged that the billions invested by the government in the fund were uninsured and that the fund was operating without staff.
- The Auditor-General has consistently flagged the Uwezo Fund for mismanagement, warning of its imminent collapse due to the failure to implement prudent financial management policies.
The government is owed Sh18.4 billion in unpaid loans disbursed to Kenyans through three revolving funds – Hustler Fund, Uwezo Fund and Women Enterprise Development Fund – according to details from various agencies.
However, the loans disbursed by the Youth Enterprise Development Fund, another revolving fund, remained sketchy. Its CEO, Josiah Moriasi, declined to respond to our enquiries. However, Auditor-General Nancy Gathungu has previously raised questions about the management of the fund, where corruption and other irregularities have been reported.
Of the Sh17 billion still in the hands of Kenyans, the Hustler Fund accounts for Sh7 billion, the Uwezo Fund (Sh7.5 billion), the Women Enterprise Development Fund (Sh2.5 billion) and the Youth Enterprise Development Fund (Sh1.4 billion).
Although the government plans to raid the M-Pesa and airtime accounts of Kenyans who have failed to repay the Hustler Fund to recover the money, it hasn't outlined the measures to recover the unpaid billions in the other funds.
MPs are already calling for the Hustler Fund to be wound up after it emerged that the billions invested by the government in the fund were uninsured and that the fund was operating without staff - raising questions about the prudence of its management.
Appearing before the National Assembly's Special Funds Account Committee recently, the acting CEO of the Hustler Fund, Elizabeth Nkuku, said the fund had reached a dead end and was now considering forceful recovery measures.
“The beauty of this fund is that we have the phone numbers and the unique identifiers of the defaulters — the national ID. They are people of means. They are people who just don’t want to repay,” Ms Nkuku told the committee chaired by Migori Woman Representative Fatuma Mohamed.
However, she revealed that the Hustler Fund is not insured.
“What we are looking at is to get money from their M-Pesa or airtime. We are also in the process of considering appropriate legal provisions,” she said.
The Hustler Fund is a digital financial inclusion initiative, and was one of President William Ruto's campaign promises ahead of the August 2022 general election. He saw it as a way to improve access to financial services for the majority of poor Kenyans.
Ms Nkuku noted that the 13 million Kenyans who have borrowed from the Hustler Fund have defaulted on their repayments. Most of the defaulters, she noted, are people who borrowed in the first and second months.
Ms Nkuku told the committee that based on their history of mobile money transactions, most of the Hustler Fund defaulters are people of means as they transact an average of Sh21,000 every month.
During the 2022/23 financial year, most of the beneficiaries qualified for a loan amount ranging from Sh500 to Sh1,000.
The Uwezo Fund, on the other hand, disburses loans at the constituency level through working committees. It aims to support women's groups, youth groups and people with disabilities to boost their businesses.
Since it was established in 2013 by Kenya's fourth president, Uhuru Kenyatta, it has disbursed Sh6.8 billion to the 290 constituencies, according to data provided by its CEO, Peter Lengepiani.
The data shows that 777,698 Kenyans - made up of 131,907 men and 641,756 women who were members of the 82,241 groups - have benefited from the fund.
There are also 346,074 Kenyans who were individual beneficiaries. They include 195,470 men and 150,604 women.
The beneficiaries of the Sh8 billion disbursed are 53,280 women's groups, 26,865 youth and 2,096 people with disabilities. Of the amount lent, Sh3.08 billion has been repaid, leaving Sh7.5 billion outstanding.
The Uwezo Fund offers two loan products. The first is the Wezesha loan, which is for first-time borrowers who want to borrow between Sh50,000 and Sh100,000 to support their businesses. The second is the Endeleza loan for repeat borrowers who qualify for up to Sh500,000.
The Auditor-General has consistently flagged the Uwezo Fund for mismanagement, warning of its imminent collapse due to the failure to implement prudent financial management policies.
The failure to provide auditors with records of groups that have received loans since inception also raises concerns about whether the fund is being disbursed to deserving cases.
For instance, Auditor-General Nancy Gathungu, in her report on the accounts of the Uwezo Fund for the year ending June 30, 2021, notes that some of the fund's constituency offices were closed years ago, leaving taxpayers at a loss.
Ms Gathungu also notes that the management of the Uwezo Fund cannot account for the billions it has lent to various groups since its inception.
The audit report notes that the Uwezo Fund office in Bureti Constituency has been dormant since 2016, threatening the recovery of outstanding loans.
Ms Gathungu has also flagged the fund for internal control weaknesses in its management at constituency level.
Some of the issues flagged by Ms Gathungu include management issuing loans to groups without following procedures and without proper means of tracking repayment.
“The records revealed deficiencies in documentation, authorisation and approvals of loans to prevent irregular loans. Individual loan accounts and details of loan beneficiaries were not maintained for instance in Muhoroni and Khwisero constituencies,” the audit said.
Some groups were also granted loans without evidence of approval and completed application forms.
“The effective management and recoverability of the loans may not be achieved. This raises doubt on the controls put in place to implement the activities of the fund to achieve the intended purpose,” warns the Auditor-General.
The Women Enterprise Fund is also disbursed at constituency level.
The Auditor-General's report on the accounts of the Women Enterprise Fund for the year ended June 30 has cast doubt on the recovery of Sh2.5 billion due from the Constituency Women Enterprise Schemes (CWES).
The Youth Enterprise Development Fund, which was set up during the Kibaki era to help youth-owned businesses access low-cost loans, has disbursed Sh1.4 billion in loans over the past three financial years, providing business support services to 380,000 youths.
However, the recoverability of funds advanced remains a challenge, although the fund expects to recover Sh635 million from outstanding loans.
The fund is to be merged with the other affirmative action funds – Women and Uwezo – and its budget has been cut by more than half in the current financial year.
The fund was allocated Sh225 million for development and recurrent expenditure, a 55 percent reduction from the Sh500 million allocated in 2023/24.
The Auditor-General, in her report on the fund's accounts for the year ended June 30, 2022, highlighted the Sh180.4 million owed by the collapsed Chase Bank.
“A review of judgement on a corruption case revealed that the amount was irregularly paid to a supplier,” the audit report says.
The audit report also reveals that the fund continued to perform poorly in the year under review, recording a deficit of Sh123.23 million, noting that the poor performance has persisted for the past seven years.
“This has eroded the capital invested in the revolving fund and impaired the ability of the fund to discharge its mandate and thus casts significant doubt on the ability to sustain its services in the foreseeable future,” Ms Gathungu says.
Members of the Special Funds Accounts Committee also questioned how the Hustler Fund is disbursing billions to Kenyans, money that is not insured.
MPs Majimbo Kalasinga (Kabuchai) and Rahim Dawood (North Imenti) questioned the relevance of the fund, pointing to the grey areas that could lead to the loss of billions of taxpayers' money.
“Can we know if the money was insured and by which insurance company? We can recommend the fund to be wound up. How can we give out billions that are not insured?” posed Mr Kalasinga.
“The Hustler Fund is not working,” Mr Dawood said.
Ms Mohammed directed the acting CEO of the Hustler Fund to provide the committee with all the details of the 13 million defaulters.
