Hustler Fund: CS Chelugui clarifies red flags raised by Auditor General, says data is available and verifiable

Cooperatives and MSMEs Cabinet Secretary Simon Chelugui has defended President William Ruto’s pilot project, the Hustler Fund, over concerns about irregularities in the establishment of the fund.

In a statement on Tuesday, Chelugui clarified issues of inconsistencies, transparency and lack of unaccountability from the government on the rollout and management of the credit fund which Auditor General Dr Nancy Gathungu raised.

Chelugui highlighted the issues raised by Dr Gathungu attributing the failure by the Fund to provide financial statements for audit review to a timeliness hold-up, saying that the required data was presented and would be submitted for audit.

“During the audit, the office flagged a number of issues that required clarity and additional information that bordered mostly on data reconciliation. Given the nature of the product, the data and the information needed, the process took a bit longer and by the time we were time bad as the audit report had to be tabled to Parliament as per Constitutional timelines,” he explained.

“Whereas they received our management responses, due to the timelines, they could not therefore reverify the system to establish the milestone that had been covered in data reconciliation and subsequent updates to address their audit quarries.”

The ministry in its defence acknowledged several challenges during the fund's inception, including understaffing, errors in note numbering, data extraction issues, missing data dumps, and overall extraction challenges, as the cause of some of the cases of data manipulation and Integrity.

“On Concerns about data manipulation and Integrity, the audit process was not in a live environment and therefore during the data extraction there are possibility of having data errors due to the huge sizes. Some of this could be due to data truncation and reconciliation errors,” he noted.

In regard to issues raised on client identification, registration, onboarding and subsequent borrowing, CS Chelugui noted that telecoms and banks had the requisite and verifiable data since the Fund uses an ID and a sim card as a mandatory requirement for registration.

“Out of over 20 million borrowers in the review period, only 5 borrowers did not have their IDs captured. This was brought about by a technical transition surge issue on December 1, 2022,” he stated.

“The issue on Duplication of loan IDs was a case of customers topping up their existing loans but within their assigned credit limit. For loan top-ups as opposed to new loan requests, the system maintains the same loan contract (loan ID) as only performs principal increase to the existing loan.”

The Auditor in his discrepancy report on Monday had reported cases of 129,315 closed accounts holding Ksh. 81,622,289, and 867 instances of duplicate loan identity numbers, which processed 1,978 loans amounting to Ksh.477,928. 

CS Chelugui further addressed concerns that the fund exceeded its set-loan limits including 238,707 cases where loans totaling Ksh.420,312,323 were issued, surpassing the initial limit by Ksh.219,615,242. 

He said that the Fund’s model ensured a limit review two times a year, which later introduced a savings-led limit increase

“On limit enhancement, the Hustler Fund personal product design provides room for the limit review. So far, we have had two limit reviews, the first one in February 2023 and the second one in December 2023 which introduced a savings-led limit increase. There were borrowers who saved voluntarily which boosted their loan limit increment,” Chelugui said.

The CS at the same time expressed commitment to work with the Auditor General and open its doors for an audit to ensure the Ministry remains compliant to the regulatory standards in line with the law.

“We are in the process of conducting an audit for this financial year by the Office of the Auditor General (OAG) that will help to verify all transactions and ensure compliance with regulatory standards. The Hustler fund is a digital platform, and all records can be traced, ranging from the date of application, the transaction IDs which can be provided if an entity meets Data Protection criteria,” added Chelugui.

“The Ministry of Cooperatives & MSMEs is committed to conducting a live environment audit by the OAG to verify all operational processes and address any outstanding issues promptly. We remain dedicated to ensuring that the Hustler Fund operates with the highest standards of integrity, accountability, and efficiency.”

According to the CS as of now, the Fund has attracted a customer base of 23.6 million Kenyans with disbursements amounting to Ksh.54.5 billion and accrued savings of Ksh.3.1 billion.

The group product, on the other hand, has served a total of 23,534 groups disbursing Ksh.182.7 million so far.