President William Ruto has extended a lifeline to four million Kenyans who have defaulted on loans from the Hustler Fund, urging them to repay their outstanding amounts to unlock higher borrowing limits. Speaking during a Town Hall meeting at the Kenyatta International Convention Centre (KICC) in Nairobi, the President assured defaulters that repayment would make them eligible for the Bridge Loan, a new product offering enhanced loan benefits.
The Hustler Fund, launched in 2022, was designed to provide low-interest credit to millions of Kenyans, particularly those in low-income brackets. As of August 2024, the fund had recorded 21 million borrowers, accounting for 45% of active loans in Kenya’s digital lending sector. Despite its popularity, the fund has faced challenges with repayment, as approximately 13 million Kenyans have defaulted on loans, resulting in a total of Ksh 7 billion in unpaid debts.
A Second Chance for Defaulters
President Ruto emphasized that defaulters who clear their outstanding loans would not only regain access to borrowing but also see their credit limits doubled or even tripled under the Bridge Loan product. This new offering is designed to reward good borrowing behavior by providing:
- Enhanced Loan Limits: Borrowers can access larger amounts than their initial loans.
- Extended Loan Term: A repayment period of 30 days, compared to the current 14 days.
- Competitive Interest Rates: Starting at 8% per annum, with a one-month rollover at 9.5%.
“The four million people out there who have not paid their money, they have a chance,” Ruto stated. He explained that repaying outstanding amounts would allow borrowers to be assessed over two months, after which they could qualify for the Bridge Loan.
Focus on Financial Inclusion
The President reiterated the government’s commitment to fostering financial inclusion and eliminating barriers to credit access. Unlike traditional financial institutions that penalize or blacklist defaulters, the Hustler Fund seeks to provide defaulters with opportunities to improve their creditworthiness.
“We are not interested in penalizing or condemning anyone. The Hustler Fund is about giving Kenyans a chance to rebuild their credit and improve their financial health,” Ruto said.
The government’s strategy aligns with its broader agenda of empowering low-income households and supporting small-scale businesses. The Bridge Loan product is expected to incentivize repayment while offering more flexible terms for borrowers to manage their finances effectively.
Legal Framework for Recovery
In addition to incentivizing repayment, the government has proposed a legal framework to address persistent loan defaults. This framework, announced in October 2024, includes measures to recover defaulted loans by accessing funds directly from borrowers’ mobile money services, such as M-Pesa, and mobile airtime.
The move aims to recover billions in unpaid debts while maintaining the fund’s sustainability. However, the proposed measures have sparked debates about privacy and the ethics of automated deductions. Critics argue that such measures could disproportionately affect vulnerable borrowers, while proponents believe they will ensure accountability.
The Path Ahead
The Hustler Fund remains a critical pillar in Kenya’s financial inclusion agenda. Its success depends on striking a balance between incentivizing repayment and providing accessible credit. With the introduction of the Bridge Loan, the government hopes to re-engage defaulters and expand the fund’s impact on Kenya’s economy.
As the government seeks innovative ways to address defaults, the Hustler Fund’s evolution underscores the importance of tailoring financial products to the needs of low-income households while ensuring accountability and sustainability. For the millions of Kenyans relying on the fund, the promise of higher loan limits and more flexible terms marks a renewed opportunity to rebuild their financial lives.
