The Kenyan government’s US$346 million Hustler Fund launched in November 2022 has to give loans to small Kenyan businesses that don’t have access to credit through traditional means, has reportedly suffered a significant setback in the form of non-performing loans.
So far, KES33 billion ($228 million) has been lent out, and there is an outstanding loan of KES10.2 billion ($70.5 million).
But according to the repayment schedule, 29% of that, about KES3 billion ($20.7 million) are already being considered non-performing loans.
Even though these loans come with a friendlier interest rate (8%) compared to traditional loans from banks, the Hustler Fund is racking up more non-performing loans (NPL) than those fancy regular banks, cooperatives (SACCOS), and even microfinance banks.
To put it in perspective, those typical banks, microfinance banks, and cooperatives like SACCOS have non-performing loans (NPL) rates of 14.5%, 23%, and 8.86%, respectively, while the Hustler Fund’s NPL rate is flying higher at 29%.
The Kenyan government has linked the Hustler Fund to existing funds that also support the economically disadvantaged so that defaulters will not get access to more funds until they improve their credit scores.
It also introduced credit scoring in February to reduce the rate at which people default on loans from the Hustler Fund. The bad loans will not go away completely, as is typical of any credit business, however, the quality of the Hustler Fund loan book has been improving.
