Gov't to write off Ksh.6B Hustler Fund loan defaults, seeks additional Ksh.5B

Micro, Small and Medium Enterprises Development Principal Secretary Susan Mag'eni says that the government will seek to write off bad loans amounting to Ksh.6 billion borrowed by 10 million Kenyans in 2022.

Mang'eni, who appeared before the National Assembly’s Committee on Trade, Industry and Cooperatives, says the borrowers have failed to pay despite borrowing the cash more than two years ago.

The PS defended the performance of the fund, indicating that 9 million borrowers were actively borrowing and urged MPs to approve a Ksh.5 billion injection into the fund this financial year.

"They never repaid, and that is what we will be seeking to write off, so the portfolio that is totally at risk and is in default is about between Ksh.5 billion and Ksh.6 billion,” the PS said.

Mang'eni says that so far they have disbursed Ksh.65.7 billion, with repayments standing at Ksh.53.2 billion.

The PS was at pains to explain the performance of the fund to MPs. Despite the bad debt, she noted that 9 million Kenyans have faithfully repaid and grown their limits.

It is on this basis that Mang'eni urged MPs to approve an additional Ksh.5 billion to the fund in the next financial year, even as they pursue the defaulters.

"Those who are doing better — we need to enhance their limit. And the moment you enhance someone's limit from Ksh.500 to Ksh.10,000, you have to fund, and that is why we are asking for additional funding — to fund the 4.5 million who will be graduating to the bridge and at the same time take care of the new applicants who are onboarding Hustler Fund every day,” Mang’eni noted.

With the bad performance, MPs have poked holes into President William Ruto's flagship project, which they say could sink the government into deeper loans amidst a struggling economy.

"At this rate, I think you're going to dive into something else. We cannot afford to be writing Ksh.6 billion for you,” said Starehe MP Amos Mwago.

The PS says the ministry is contemplating changes in law to enable it to introduce forceful recovery of the unpaid loans and ensure the fund reaches many Kenyans in need of financial support.

The fund was deemed a game-changer in their plan to lift small-scale businesses — a promise that enticed millions of hustlers during the 2022 presidential campaign.

The aura of quick government loans with lower interest rates attracted over 25 million Kenyans in two years, where close to half that number have defaulted in repaying their loans.