Questions on Hustler Fund launched by President Ruto

While launching the new product, President William Ruto hailed its simple procedure that could help entrepreneurial individuals unlock their doors to investments.

Borrowers can access Hustler Fund via a USSD code, *254#, or through a mobile app. The code can be dialled on Safaricom, Airtel and Telkom mobile. When a borrower dials *254#, one has to register, with their information shared with the Hustler Fund.

If on Safaricom for instance, one is required to type in their MPESA pin and immediately receive a message, “Your registration has been received. Please wait for a confirmation message with the amount they qualify for within two hours.”

The fund is designed to provide four key products. For now, only a personal finance product has been unveiled.

Under personal finance, a borrower can for the moment access between Ksh.500 and Ksh.50,000. Their qualification will grow by borrowing more and repaying within the allowed time of 14 days. The applicable interest rate is 8 per cent per annum, calculated per day.

This means that were a borrower to borrow Ksh.1,000, they will be charged interest of Ksh.3.60 should they repay on the 14th day. That rises to Ksh.153 shillings interest for a loan of Ksh.50,000 that must be repaid in two weeks.

But not all the money will be released to the borrower. Five per cent of the loan will be deposited to a borrower's savings account. In the case of a Ksh.1,000 loan, that would be Ksh.50, split into Ksh.35 shillings for a pension account, being 70 per cent and Ksh.15 sent to the short-term savings account of the borrower.

To qualify, a borrower needs to be 18 years and above and with a Kenyan identity card. They need to be subscribers of either M-PESA, Airtel money or T-Kash, with a sim card older than 90 days.

A borrower can only access the loans using one line, given the unique identifier is the identity card number.

Should a borrower not clear the loan within 14 days, their credit rating is affected immediately. They are however allowed an extra 15 days to repay the loan but at a higher annual interest rate of 9.5 per cent calculated per day.

After 30 days of default, the borrower loses all credit scores, their account will be frozen and can only return to the fund by clearing the balance, then start all over again to build their portfolio. Defaulters however will not be reported to credit reference bureaus.

And as the government rolls out one of the key campaign promises, questions arise. It is not yet clear what is the source of the funds now available for borrowing given that parliament is yet to allocate any funds to the fund.

Even though parliament approved regulations establishing the fund on Tuesday, the fund board is yet to be established and inaugurated given some of the members have to be recruited. The fund is yet to have a secretariat.

According to the regulations, parliament shall allocate a maximum of Ksh.50 billion to the fund every year. It shall also generate income from interest, charges and penalties. Other sources are income from the fund’s investments and grants, donations and gifts to the fund. It is not clear how many deposits have been made to the fund already.

Several Kenyans have since queried the system to see their borrowing threshold.