Kenya is reportedly in negotiations with the World Bank and the European Union (EU) regarding the provision of financial assistance for the Hustler Fund, which constitutes President Ruto's prominent economic initiative intended to facilitate affordable credit access for Kenyan citizens.
For the record, officially designated as Financial Inclusion Fund, the program was launched in the previous year as part of government endeavors to revamp Kenya's lending system. Within the context of the East African nation, digital loans are commonly used for purchases, often subjecting borrowers to exorbitant annual interest rates, which can reach as high as 100% or more. This situation has led to substantial levels of indebtedness, with approximately 60% of Kenyan individuals being confronted with challenges in repaying their loans. The Hustler Fund, which received a commitment of KsH50bn ($396m) from the government this year, operates by providing instant loans at a significantly reduced annual interest rate of 8%.
According to recent announcements by Simon Chelugui, the cabinet secretary for co-operatives and micro, small, and medium enterprises development in Kenya, the World Bank is contemplating the possibility of extending financial support of up to KsH20bn ($129m), while the EU has also conveyed an interest in providing supplementary assistance.
The involvement of international organizations in terms of financial backing could assume particular significance in the case of the Hustler Fund, given that the experts have raised doubts regarding the program's financial sustainability in the long term. The huge operational costs associated with the program raise concerns, especially in a nation already burdened by significant debt and the potential risk of default on sovereign debt.
Another noteworthy risk associated with the Fund is the potential for elevated loan defaults among borrowers. The magnitude of the loans provided through the program, which commences at KSh500, is regarded as inadequate for businesses to effectively utilize. This aspect implies that the existing structure of the Fund is unlikely to invigorate broader commercial activities or foster economic expansion. Mutonyi asserts that if the financial support for the Fund materializes, it could potentially address several of these issues.