Fund
A number of Nyeri residents have waded into the discussion regarding plans by the Government to trace Hustler Fund loan defaulters.
The Kenya Kwanza government established the Financial Inclusion Fund popularly referred to as Hustler Fund to help cushion and mitigate financial shocks for this informal sector in a bid to boost earnings for those at the bottom of the economic pyramid.
The Fund was meant to offer among other things affordable credit, competitive savings and pension products But despite having so far disbursed at least Sh 52 billion to more than 23 million clients, Sh 7 billion still remain unpaid. But John Mwangi says the revolving fund has to a large extent failed to achieve its intended target due to the prevailing economic challenges.
Mwangi who operates a bodaboda business in Nyeri claims the fund has become another financial burden to Kenyans especially for those who have failed to pay due to soaring poverty levels in the country.
“When we took the loans, it was because we needed to improve our businesses, not because we had guaranteed profits. Sometimes business is slow making it even hard to make both ends meet. It would therefore be unfair for the government to raid our accounts without first understanding the pain we are going through due to prevailing economic challenges,” he told KNA.
Although Mwangi declined to reveal how much he owes the Government, his argument was that his failure to repay his loan was not out of malice but due to declining business fortunes in his business. He nevertheless said he remains optimistic things will improve soon after which he will repay the loan.
Genesis Ngunjiri, another boda-boda operator also voiced his opposition to the move, arguing that it might push the already struggling sector into further distress. Ngunjiri claims many bodaboda operators often take loans for specific business needs, such as for repairs or insurance and that any direct recouping of the loans from their accounts will only make things worse for them.
He also says such a drastic move may end up eroding the trust between the borrowers and lender and scare many potential beneficiaries from accessing the fund.
“We appreciate the government for introducing the Hustler Fund because it has now turned out to be a lifeline for many. Be as it may, the State has to understand that paying back this money may also turn out to be a challenge for us. In the event they decide to go for what is in our accounts we may be left worse off, unable to even afford our very basics or even fuel our motorcycles,” he pointed out.
“Once we start seeing deductions, people will stop taking loans since no one will be willing to lose their money. Eventually this will defeat the very purpose of having such a fund in the first place,” Ngunjiri added. He called for alternative strategies to encourage seamless repayments such as better grace periods and more flexible loan terms.
Meanwhile, Keziah Njoki who runs a small grocery store in Nyeri town, believes that while loan recovery is important, the manner in which the government plans to implement this could prove problematic. She expressed concern that unexpected deductions from her account could leave her in a difficult financial situation, particularly during months when business is slow.
Keziah suggested the government should first invest in financial literacy programs where borrowers are educated on how to manage their funds.
“I fully support the Government that loans have to be repaid, but any automatic deduction from our accounts can be too invasive. As a businessperson, I rely on M-Pesa to manage my cash flow, paying suppliers, and receiving payments from customers. The fund managers should therefore look for ways of assisting us rather than taking money by force,” she said.
Speaking when she appeared before the National Assembly’s Special Funds Account Committee, early this month Financial Inclusion Fund acting CEO Elizabeth Nkuku, said despite several reminders, defaulters have since failed to repay the loan. “They are mostly people who borrowed in the first and second months and the default amount is about Sh.7 billion,” Nkuku told the committee.
According to Nkuku, most of the defaulters are capable Kenyans who can repay the loan, with a review of their accounts indicating that they transact an average of sh.21,000.
