Savings in the Hustler Fund will earn interest at prevailing market rates, the government announced yesterday, even as nearly three-quarters of the low-cost loans issued are yet to be rapid.
Cooperatives and Micro, Small and Medium Enterprises Cabinet Secretary Simon Chelugui said the government had disbursed Sh9.58 billion in 19 days with just Sh2.64 billion repaid to date.
The Hustler Fund was launched by President William Ruto on November 30 to give loans of between Sh500 and Sh50,000 at an annual interest rate of 8 per cent.
Mr Chelugui said the largest loan issued to a borrower so far is Sh5,000 but borrowers can gradually increase their limit to Sh50,000.
He said 59.3 per cent of the loans had been repaid by December 14, when the loans issued on the first day of the launch were due.
The CS said 70 per cent of the savings in the fund will be paid to the borrowers once they hit retirement age. The government deducts 5 per cent of each loan which goes towards the savings of the borrower.
Some 70 per cent of the deductions go towards long-term savings in their pension account while 30 per cent are short-term savings. The money is saved at KCB and Family Bank, but the CS said the government is onboarding the National Social Security Fund to be the long-term custodian of the savings.
The two banks will, however, withhold the savings that a borrower has in the fund until they have repaid their loans.
“The savings will earn interest at market rates offered by the two banks on fixed deposit accounts,” said Mr Chelugui.
Some 16.59 million Kenyans have opted into the fund, underlining the increased reliance on borrowing by individuals for their daily needs. Some 2.69 million customers have already borrowed more than once.
The majority of the borrowers (33 per cent) are aged between 18 to 29 years, 30 per cent are aged between 30 to 39 years, 19 per cent are between 40 to 49 years, 10 per cent are aged between 50 to 59 years, 5 per cent between 60 to 69 years while 2 per cent are above 69 years.
Nairobi leads in the number of subscribers to the fund at 1.4 million borrowers, and the amount of money they have borrowed so far is Sh1.14 billion. This is followed by borrowers in Kiambu at Sh651 million. Those in Nakuru have taken Sh454 million and those in Machakos Sh354 million.
Mr Chelugui said President Ruto will launch the second product of Hustler Fund in February next year.
The product, which targets businesses, will disburse loans of between Sh100,000 and Sh2.5 million. The money will be disbursed through chamas, banks, Saccos and microfinance institutions, said the CS.
“MSMEs contribute about 40 per cent of the Gross Domestic Product. This shows the critical role MSMEs play in driving the growth of our economy and why this fund is crucial in widening access to credit,” he said.
