The Hustler Fund, a loan app introduced by Kenyan President, William Ruto, in November 2022, is experiencing a higher default rate on repayments compared to competing products from commercial banks, SACCOs (Savings and Credit Cooperative Organizations), and microfinance banks.
According to local reports:
- Out of the Hustler Fund’s outstanding Sh10.2 billion ($70.1 million) worth of loans, 29% is deemed to be portfolio-at-risk, implying it has not been serviced by the borrowers as per the agreed schedule
- On the other hand, in the banking sector, non-performing loans to loan book ratio (NPL ratio) was reported to be 14.5% at the end of June 2023
- SACCO lenders reported a non-performing loans to loan book ratio (NPL ratio) of 8.86 % at the end of December 2022, according to data from the Sacco Societies Regulatory Authority (SASRA)
- As of December 2022, microfinance banks reported a default rate of 23% on their loan books
“Out of the Sh33 billion ($229 million) that has been lent out [under the Hustler Fund], the outstanding loan book is about Sh10.2 billion ($70.1 million); remember these are short-term loans so they get repaid pretty fast. Out of the outstanding amount, 29 percent is not performing on time,” the President’s adviser on matters of financial inclusion, Moses Banda, told the Business Daily.
The Hustler Fund has reportedly disbursed loans totaling Sh33.3 billion ($229 million) to approximately 17.2 million borrowers. Among these borrowers, 7.6 million are repeat borrowers. This data indicates there is a significant demand for loans from the fund, with many individuals seeking multiple loans resulting in an average loan size of Sh1,936 ($13.32).
The signature campaign promise by President Willliam Ruto has mobilized approximately Sh1.8 billion ($12.37 million) in savings. Out of this amount, 30 percent is accessible to savers after one year, while the remaining 70 percent is set aside for borrowers’ pensions.
To address the high default rate, the fund’s credit rating is now being used when Kenyan’s want to access other government funds, for instance Affirmative Action funds, so that a poor rating would deny them access to these other funds.
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