Kenyans have repaid only 5.1 per cent of the loans they took from the Hustler Fund, threatening the sustainability of the kitty launched last week to give low-cost loans to individuals and businesses.
Customers are required to repay the loans within 14 days at an interest rate of 8 per cent per year or 0.02 per cent daily, which jumps to 9.5 per cent per annum for the days on which the facility goes into default.
The National Treasury is betting on adequate repayment of the hustler fund loans to supplement the resources that will be allocated to the Fund each year by Parliament.
The Ministry of Co-operatives and Micro, Small and Medium Enterprises said borrowers have repaid KES 190.62 million of the KES 3.69 billion disbursed so far.
Some 10.62 million Kenyans have opted into the fund, which has processed 6.46 million transactions. The fund is administered by KCB Bank and Family Bank.
Some KES 184.48 million has been saved on behalf of borrowers, while 185,028 individuals have already borrowed more than once.
The high borrowing rates signal a huge appetite for loans among Kenyans, who are heaving under a high cost of living, forcing them to resort to short-term loans to meet their daily needs.
President William Ruto had warned that the hustler fund is not free money and that the government will seriously pursue defaulters.
Some 95 per cent of a loan is deposited in a borrower’s money wallet while 5 per cent is deducted automatically to go to the borrower’s savings.
Of the money that goes to savings, 70 per cent will be put in long-term savings in a pension account, while 30 per cent will be short-term savings.
The two banks will withhold a borrower’s savings in the fund until they repay their loans.
“To mitigate against the risk of total default by the borrowers, the bank shall retain the 30 per cent intended for short-term savings in a suspense account until full repayment of the loan,” said KCB in its terms and conditions.
Once a borrower repays the loan, he or she will access the short-term savings after one year.
Read also; Millions of Kenyans Rush to Take Loans after Hustler Fund Launch.
