Borrowers to get Sh500,000 in hustler loans, Saccos Sh100 million — Ruto
At the moment President William Ruto officially launched access to Hustler Fund loans on Wednesday, roughly 600 requests per second were being registered by service providers. This translates to 36,000 requests per minute or roughly 2.2 million applications per hour.
By dialing up *254#, potential borrowers are first registered and soon after informed via a text message about the amount of loan that they qualify from the Kes50 billion set aside by the Kenya Kwanza administration to lift the fortunes of millions of enterprising Kenyans.
At the moment, individual borrowers qualify for between Kes500 and Kes50,000 which is payable at an interest rate of 8 percent per annum. Currently, digital lenders demand between one and 10 percent interest per day.
Starting February next year, however, Dr Ruto said the government will introduce ‘micro loan product’ where individual borrowers will access loans of up to Kes500,000, a tenfold increase of the current Kes50,000 limit for applicants in that category.
Two months later in April, borrowers clustered into Groups, Chamas and cooperatives will be eligible for credit facilities of up to Kes10 million, while Saccos under the firm grip of their sector regulator, the Sacco Societies Regulatory Authority (SASRA) will access between Kes10 million and Kes100 million from the Hustler Fund.
“Every 60 days, we will be launching a new product to ensure that we empower every Kenyan to do business,” said the President.
TDr Ruto’s flagship financial product tailored for individuals, SMEs, groups, chamas and Saccos places more premium on one’s credit score over the traditional collateral usually preferred by mainstream banking industry.
“We are replacing the collateral system that has been built around title deeds, logbooks… we are building a collateral system based on credit scoring,” the President said at the launch of his signature campaign promise in Nairobi on Wednesday.
“There will be no bureaucracy regarding access to Hustler Fund. One will only need access to a mobile phone to get the financing,” Dr Ruto explained.
The President said the loan plan is in its formative stages and will therefore require improvements to accommodate entrepreneurs asking for loan amounts over Kes50,000.
The repayment period of the loans has been set at 14 days and 5 percent of the amount borrowed will be deposited into one’s Hustler Fund savings account. All loans borrowed erroneously cannot be refunded and must be honoured.
“Hustler Fund will be 500 times cheaper than the average lender in the market today,” Dr Ruto said.
Addressing Hustler Fund launch attendants at the GreenPark Bus Terminus in Nairobi, the President revealed that the fund will be fortified with superior offerings at 60-day intervals.
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Dr Ruto also emphasized the value of financial discipline among debtors to increase their odds of qualifying for bigger loans as they get through the layers of credit scores.
“When you borrow and repay, you get a chance to borrow more money. If you borrow Kes500 and repay, you’ll be eligible for Kes1,000. After a few more months, you can borrow Kes2,000 then Kes5,000, Kes20,000, Kes50,000 and graduate to micro loan,” he said.
The financing model also encompasses a savings component with a return of 50 percent on an individual’s savings by way of government counterpart funding. This implies that for every Kes2 one saves, the government will be extending a boost of Kes1 for a maximum of Kes3,000 per year.
All the fund’s credit, savings, pensions and investments products will be delivered to beneficiaries electronically.
He said that fiscal discipline will be the sole determinant of a person’s creditworthiness.
“We have approximately eight million Kenyans that can’t access credit because of their bad credit history. For every Kenyan locked out of the credit system, the government of Kenya is giving you a second chance. Those who will get a second chance, please do not abuse it,” he added.
By rolling out access to affordable credit, the President said the government is seeking to create opportunities for millions of enterprising Kenyas at the bottom of our economic pyramid “to work their way up and fulfill their aspirations.”
At the moment, micro, small and medium enterprises account for 98 percent of all businesses in Kenya and they provide jobs to nearly half of the country’s total workforce contributing an estimated 33 percent in GDP growth.
The best strategy to accelerate economic growth and achieve shared prosperity is to empower millions of struggling yet willing and capable Kenyans and enlist them in gainful activity, the President explained.
