(Bloomberg) — Kenya is in talks with the World Bank and European Union to ramp up its “Hustler Fund” project that is already providing cheap credit to more than 20 million of the country’s poor.
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A top government official said the World Bank was discussing backing that could amount to as much as 20 billion shillings ($139 million), including via an existing program to support small enterprises. Combined with investments from the Treasury, this could leverage lending of 200 billion shillings over the next five years.
Simon Chelugui, cabinet secretary for Co-operatives and Micro, Small and Medium Enterprises Development, said Treasury plans to invest 10 billion shillings by June 2024. That will top up its initial funding of 12 billion shillings.
Talks with the EU and the US Agency for International Development, another potential backer, are still at an initial stage, he said in an interview on Monday in the capital Nairobi.
A World Bank spokeswoman said it was working with the Kenyan government and while it was not currently looking at direct Hustler Fund financial support, resources could be channeled to small enterprises who have good enough scores from the Fund to graduate to market-based financing.
The EU said it was “most impressed” by the uptake of Hustler Fund and was exploring how it could provide support.
“We were particularly looking at value chain development with SMEs,” spokeswoman Hamdi Ahmed in Nairobi said in an emailed response, referring to small and medium-sized enterprises.
The Hustler Fund, which started issuing loans in December 2022, is designed to deliver on a key campaign promise for affordable credit that President William Ruto made during last year’s tightly contested election.
The fund’s average loan size is 700 shillings – less than $5 — with more than half of borrowers accessing it via simple mobile phones, he said, rather than costly smartphones.
Almost half the clients, of whom 21.3 million have already registered, are women and 70% are under the age of 40. About a third of the borrowing is done on a repeat bases, with these small sums taken out early in the morning and repaid by 9 p.m. at an annual interest rate of 8%. That’s cheaper than digital mobile money already available via the private sector.
The Hustler Fund is run by KCB Group Plc and Family Bank Ltd., and is available via any of the nation’s mobile money platforms.
It also includes an element of mandatory savings: An automatic 5% of every loan is “saved” on behalf of borrowers into a separate government-run kitty, with access to the money subject to certain restrictions.
Another of its goals is “to correct a market failure in the credit market,” which has seen more than 8 million Kenyans get tarnished with poor credit references, Chelugui said.
Instead, Hustler clients will be able to build a credit track record. The government hopes that as many as 5 million Kenyans will be able to become bankable and enter the formal part of the economy in this manner.
As a result, the fund will “crowd in private sector financing” to graduate good borrowers to traditional bank loans, making it “complimentary” to commercial lenders, according to Chelugui.
About 7.4 million customers are repeat borrowers and roughly 10% of the loans are categorized as being “past their due date,” the minister said.
That compares with the ratio of commercial banks’ gross non-performing loans, which stood at 14.5% in June 2023, according to the Central Bank of Kenya.
(update in 6th and 7th paras with comment from EU)
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