In a startling revelation before the Departmental Committee on Trade, Industry and Cooperatives, the government disclosed that approximately 10 million Kenyan borrowers have defaulted on Hustler Fund loans totaling KSh 6 billion, prompting authorities to consider writing off the non-performing loans.
According to Susan Mang’eni, the Principal Secretary for Micro, Small, and Medium Enterprises (MSMEs) Development, the defaulted loans stem from borrowers who took out small amounts—ranging from as low as KSh 500—immediately after the fund was launched in November and December 2022. Many of these borrowers took out loans only once or twice, and then disappeared without repaying.
“Repayment rate for personal loans is at 80 per cent. However, we had at least 10 million Kenyans who borrowed as low as Sh500 either once or twice and they did not pay. The money at risk here is about Sh6 billion,” said Mang’eni during her session with the committee, chaired by Ikolomani MP Bernard Shinali.
The Scope of the Hustler Fund Crisis
The Hustler Fund was introduced by the government as a flagship initiative aimed at financially empowering millions of low-income Kenyans, particularly informal sector workers and small-scale traders—often referred to as “hustlers.” The fund was envisioned to boost small businesses by offering low-interest loans without the need for collateral.
However, the latest data paints a mixed picture. Out of the total Sh65.5 billion disbursed through the Hustler Fund so far, Sh53.8 billion has been successfully repaid, leaving Sh11.7 billion in limbo. Of that, Sh6 billion is now considered at serious risk due to widespread non-repayment.
Mang’eni noted that the defaulters have been blacklisted and are currently ineligible for further loans. “Those people who have not paid have been graded as bad borrowers and are not eligible to take loans at the moment,” she added.
MPs Question Additional Funding Request
Despite the substantial amount of uncollected debt, the Ministry is requesting an additional Sh5 billion in funding for the Hustler Fund in the next fiscal year. This request was met with strong skepticism from committee members.
Aldai MP Marianne Keitany questioned the rationale behind seeking new funds when billions remain unrecovered. “If the department has unrecovered billions and a Sh65 billion revolving fund, why does she want us to give her additional Sh5 billion?” Keitany posed.
Her sentiment was echoed by Kajiado South MP Samuel Parashina, who cast doubt on the credibility and viability of the Hustler Fund initiative. “We have never been satisfied with these hustlers’ funds. This money is a joke and we would like you to take it to other funds. The hustler fund is a joke I cannot even explain,” he said.
Auditor General Flags Financial Mismanagement
Further compounding concerns is a report by Auditor General Nancy Gathungu, which highlights financial improprieties surrounding the Hustler Fund. The 2023/2024 financial audit reveals that the fund now has approximately Sh8 billion in non-performing loans—money that has not been serviced for over a year.
The audit notes that 64 percent of the funds borrowed have not been repaid, raising questions about the fund’s sustainability and financial governance. Such revelations cast a shadow over the government’s flagship initiative, once touted as a lifeline for small business owners across the country.
Expansion into Insurance and Housing Products
In an attempt to evolve and possibly salvage the fund’s broader goals, the Ministry is introducing new product lines under the Hustler Fund umbrella. PS Mang’eni revealed that over 4.9 million Kenyans have been vetted through a means-testing process and are now eligible for insurance premium financing.
“We are integrating insurance premium financing products on the Hustler Fund platform to give our beneficiaries an opportunity to borrow for annualised SHA (Social Health Authority) premiums within their current limits towards realising access to universal healthcare,” she said.
Additionally, discussions are ongoing with the State Department of Housing to co-create a financing product for affordable housing, targeting borrowers who have demonstrated good repayment behavior.
The ministry argues that these expansions—targeting universal health coverage and home ownership—align with the government’s broader socio-economic agenda. However, it remains unclear how these programs will be funded or administered, especially given the existing budgetary shortfall.
“We require an additional Sh5 billion to actualise the projects, yet we only have an allocation of Sh1 billion in next year’s budget,” Mang’eni stated.
A Deeper Look at the Hustler Fund’s Structure
The Hustler Fund is a revolving credit facility that was designed to offer interest rates significantly lower than those offered by traditional microfinance institutions and digital lenders. It was rolled out in multiple phases, including personal loans, group lending, and eventually enterprise-level financing.
Initially, the fund attracted massive interest, with millions registering and applying within days of its launch. However, financial literacy among borrowers, lack of enforcement mechanisms, and poor credit risk assessments have since emerged as key challenges.
The fund also promised to graduate repeat borrowers to higher loan limits based on repayment performance. However, the large volume of defaulters has stalled this progression for many, effectively limiting the fund’s long-term impact.
Should the Government Write Off the Bad Loans?
As debate intensifies, the question looms: Should the government write off the Sh6 billion in defaulted loans?
Writing off these debts could enable the fund to start afresh and possibly refocus on more viable and accountable borrowers. However, critics argue that doing so could set a dangerous precedent that promotes financial indiscipline among the public.
Economic analysts suggest that any decision to write off such a substantial amount should come with a comprehensive review of the fund’s framework, risk mitigation measures, and enforcement mechanisms.
Conclusion: A Pivotal Moment for Kenya’s Financial Inclusion Agenda
The Hustler Fund was launched with grand ambitions—to uplift millions of underbanked Kenyans and drive inclusive economic growth. Yet, less than two years in, it faces a credibility crisis, massive defaults, and calls for restructuring.
While new initiatives like insurance financing and housing loans indicate a willingness to adapt, the success of the Hustler Fund now hinges on transparency, better borrower assessment, and stronger recovery frameworks.
If the government fails to address these structural flaws, the Hustler Fund could go down as a missed opportunity in Kenya’s push toward financial inclusion and economic empowerment.