The Government of Kenya is stepping up efforts to recover defaulted loans issued under the Financial Inclusion Fund—widely known as the Hustler Fund—as the number of defaulters continues to rise, threatening the sustainability of the flagship initiative.
Appearing before the Senate plenary on Wednesday, Cooperatives and MSMEs Cabinet Secretary Wycliffe Oparanya revealed that the government is in the process of developing a robust system to track borrowers who have failed to repay their Hustler Fund loans. The move is aimed at safeguarding the fund’s future and ensuring that more Kenyans can benefit from affordable and inclusive credit.
“We are building a tracking mechanism to identify and follow up with defaulters. The Hustler Fund was launched with noble intentions—to empower ordinary Kenyans, especially the youth and small traders,” Oparanya told senators.
Default Rate Surpasses 50%, Raising Alarm
According to data released by the State Department for Micro, Small, and Medium Enterprises (MSMEs) in September 2024, the loan default rate on the Hustler Fund has exceeded 50%, with over Sh11 billion in loans unpaid. The alarming trend has pushed the government to classify a significant portion of the disbursed amount as bad debt.
Oparanya attributed the high default rate to a widespread misconception among borrowers who believed that the loans were part of post-election handouts.
“Unfortunately, some Kenyans misunderstood the programme. Because it was launched soon after the 2022 general elections, many assumed it was a reward, not a loan they needed to repay,” he said.
This misunderstanding, he explained, has undermined the credibility and long-term viability of the initiative.
Early Borrowers Account for Bulk of Defaults
Earlier in October 2024, Hustler Fund acting CEO Elizabeth Nkuku told the National Assembly’s Special Funds Account Committee that most defaulters were individuals who borrowed during the first two months after the fund’s launch.
“Despite multiple reminders, many of these borrowers have not repaid their loans. The outstanding amount from early users stands at around Sh7 billion,” Nkuku said.
These figures underscore the urgent need for a tracking and recovery system that can compel borrowers to meet their obligations without resorting to punitive measures.
Government Launches Sh33 Billion Youth and Women Empowerment Initiative
In the same session, CS Oparanya also announced the launch of a Sh33 billion youth and women empowerment programme, a joint venture between the Government of Kenya and the World Bank. This new initiative aims to further expand financial inclusion and economic opportunities for vulnerable groups.
“This is a very important initiative. It’s a joint venture between the Government of Kenya and the World Bank involving Sh33 billion. Already, sensitisation programmes are underway,” Oparanya said.
The empowerment programme will complement the Hustler Fund by providing additional support mechanisms for women, youth, and small business owners—groups that have been traditionally marginalized by formal lending institutions.
Hustler Fund Successes Amid Challenges
Despite the challenges with loan repayment, Oparanya insisted that the Hustler Fund remains a transformative and inclusive financial model. Since its inception in 2022, the fund has disbursed more than Sh70 billion to over 25 million Kenyans.
Notably, about two million borrowers have demonstrated consistent repayment patterns and have subsequently qualified for increased loan limits—some as high as Sh150,000.
“These borrowers have shown the right spirit and discipline. The fund is rewarding them with access to higher limits to grow their businesses and livelihoods,” the CS stated.
This reward system is part of the fund’s design to incentivize responsible borrowing and build a culture of financial discipline among Kenyans.
A Digital Platform Without Collateral or Credit History Requirements
The Hustler Fund operates as a state-run digital lending platform, offering short-term credit at subsidized interest rates without requiring collateral or a traditional credit history. This model was specifically designed to shield Kenyans from exploitative digital lenders, who often impose predatory rates and hidden fees.
“The Hustler Fund does not ask for collateral or a good credit score. It’s designed to be accessible, especially for those who are financially excluded. That’s what makes it a game-changer,” Oparanya emphasized.
Government Conducting Impact Assessment
In tandem with the tracking system, the government is also conducting an impact assessment of the Hustler Fund to evaluate its reach, effectiveness, and socioeconomic benefits.
The evaluation is expected to guide policy adjustments and improve the fund’s structure to better serve its target beneficiaries—especially in the wake of criticism over high default rates and confusion around repayment expectations.
“We want to learn from the first phase and enhance the programme. The goal is to make it more efficient, sustainable, and beneficial to all Kenyans,” the CS added.
Appeal to Defaulters: Repay and Support the Cause
CS Oparanya issued a public appeal to all Hustler Fund defaulters, urging them to repay their loans and support the broader mission of financial empowerment and inclusivity.
“This fund was not a gift. It was designed to uplift millions of Kenyans and provide alternatives to loan sharks. I urge those who borrowed to do the right thing and repay their loans. It’s the only way we can sustain this programme,” he said.
Looking Ahead: Strengthening Kenya’s Financial Inclusion Strategy
As Kenya navigates the twin goals of expanding access to credit and maintaining loan sustainability, the government’s proactive approach—including partnerships with international financial institutions like the World Bank—signals a commitment to long-term solutions.
The new Sh33 billion empowerment fund is expected to run parallel to the Hustler Fund and provide tailored support to specific segments such as women entrepreneurs and unemployed youth, who face structural barriers in accessing financial services.