Kenyans aged 18 and above and businesses with a turnover of Sh100 million and below qualify for loans from President William Ruto’s “Hustler Fund”, according to draft regulations by the National Treasury.
The Public Finance Management (Financial Inclusion Fund) Regulations 2022, published by Treasury Cabinet Secretary Njuguna Ndung’u, provide that borrowers with poor credit scores will be charged higher interest and face penalties, while those who service their loans on time will have the advantage of lower rates.
The Board of the Financial Inclusion Fund will have the power to set conditions for access and rates for borrowers using a credit scoring framework.
Other functions of the board will be to develop policies to guide on savings for borrowers, the eligibility criteria, online application procedure, approval, disbursement and repayment of loans.
“Any person who intends to take a personal loan, start a business or is in a business whose turnover does not exceed Sh100 million will be eligible to borrow from the Fund,” part of the regulations says.
The proposed regulations, which are subject to public participation before becoming law, provide that those found guilty of offences related to misappropriation of the Fund will be liable to a Sh10 million fine or a prison term of five years.
Borrowers who fail to give information or falsify information while applying for the funds will face the same penalties.
The objective of the Fund, which will have a seed capital of at least Sh50 billion, is to promote lending mainly to the informal sector.
Banks and other financial institutions will get money from the Fund for lending to individuals and small businesses at a slightly higher interest rate.
“Sums due to the Fund shall be recoverable as debts,” the proposed regulations state, indicating that borrowers who fail to repay the loans should prepare to face recovery actions and penalties.
The Fund will be built from money appropriated by the National Assembly, income generated from interest and other charges such as penalties and earnings from investments.
The regulations indicate that banks, micro-finance institutions, cooperative societies, chamas, saccos and other associations that hold funds will be allowed to borrow from the Fund for onward lending.
“The object and purpose of the Fund shall be to innovate, develop and deploy bottom of the pyramid financial services and products that are affordable, accessible and appropriate for the unserved and underserved persons, including credit, saving, insurance and investment products,” the proposed regulations say.
“The Fund shall leverage on existing commercial infrastructure, including mobile payment platforms and financial institutions, agency, co-financing and on-lending partnerships; Provided that such partnerships are not exclusive or preferential, are technology neutral and do not confer market advantage to any partners over competitors.”
The membership of the board will include a non-executive chairperson appointed by the President, Treasury Principal Secretary, Micro, Small and Medium Enterprises PS and the Attorney General.
The Fund will be administered by a Chief Executive Officer who will be appointed by the Treasury CS.
The regulations will be taken to Parliament for scrutiny by the National Assembly Committee on Delegated Legislation chaired by Ainabkoi MP Samuel Chepkonga.
President Ruto on Wednesday said the smallest of enterprises in the economy would not be charged interest at the beginning “but only a small fee”.
It is not clear if borrowers will be charged a uniform interest rate since loans will be disbursed by different financial institutions.
During campaigns, Dr Ruto stated that the Fund would not charge any interest.
After taking office, the President said it would not be free money.
