Women-owned business ventures have missed out on millions of shillings in low-cost State loans, following President William Ruto’s directive that funds be processed digitally.
A new report by the State Department for Gender and Affirmative Action said that cash disbursed to women-owned businesses nearly halved last financial year ended June 2024, on a “shift in lending model to a digital platform”.
The Women Enterprise Fund (WEF), an affirmative action credit facility for women entrepreneurs, which was launched during the late President Mwai Kibaki era, processed Sh941 million in loans in that review period, a 45.29 percent fall over Sh1.72 billion the year before.
The disbursements to women groups was 62.36 percent short of the Sh2.5 billion target for the year ended June 2024.
“Target [was] not achieved in the financial year 2022/23 and 2023/24 due to suspension of manual lending and piloting of the digital lending model,” the Gender and Affirmative Action department says in the latest update on budgetary targets.
Dr Ruto in March 2023 relaunched WEF which, amongst other changes, marked the transition from manual application and processing of loans to a digital platform. This was aimed at helping women groups to access loans instantly as opposed to the average 45 days it took under the previous framework.
“We have eliminated financial intermediaries. This will boost access and check credit costs,” Dr Ruto said when he relaunched WEF.
The money disbursed last financial year represents a sharp 68.74 percent contraction from Sh3.01 billion in the year ended June 2022, the last full year of the predecessor administration of Uhuru Kenyatta.
The shift to a digital lending model further brought to a stop Local Purchase Order (LPO) financing for women entrepreneurs, with deals to supply government, companies, or educational institutions.
The data shows there were no disbursements through LPO financing in the review year ended last June as opposed to the prior year’s Sh12.2 million and Sh17.86 million for the year ended June 2022.
This is despite the government WEF board having set a goal of Sh25 million for LPO lending. The same fate also befell funding for widows who previous year got Sh21.1 million under ‘Thamini’ product which has been discontinued.
The onset of digital loans for women groups further blocked disbursements through Saccos despite having set a target of Sh60 million. Some Sh42 million were lent to women groups through Saccos the previous year and Sh55 million in the last fiscal year of the Jubilee administration.
The beneficiaries of loans under WEF, established in August 2007, nonetheless, more than tripled after the loan limits were slashed 93.33 percent, the Gender and Affirmative Action department says.
This is after 189,550 women entrepreneurs accessed loans in the year ended June 2024 compared with 59,593 women the previous year, exceeding a target of 189,000 beneficiaries for the review year.
“Target met in the financial year 2023/24 as the loan limits were reduced from Sh750,000 to Sh50,000 per group under the digital model enabling more groups to access lending,” the report states.
Successive governments have instituted affirmative action funds to help micro-sized ventures, largely owned by women and youth, to access small-ticket loans.
Despite banking industry data showing over the years that the rate of default among small businesses was lower than that for corporates, lenders continue to assign a higher risk profile to small traders who usually price them out of the formal credit market.
The Ruto administration has come up with the Hustler Fund, a key flagship programme of the administration’s Bottom-Up Economic Transformation Agenda.
At the beginning of the month, about Sh60.5 billion had been dished out to some 24.7 million borrowers since the Fund was rolled out in late November 2022.
The repayment rate is estimated at 79.50 percent, or Sh48.1 billion, while more than Sh12.4 billion has been defaulted.
Savings stood at Sh3.5 billion following the launch of the product in November 2023 following a restructuring that made it compulsory for borrowers to save five percent of their loan.
The money marked as savings is split into two, with 30 percent going into short-term savings and 70 percent going into long-term savings (pension) under a scheme managed by Kenya National Entrepreneurs Savings Trust (KNEST).
Cash under long-term savings will generate a return equivalent to prevailing treasury bills, Dr Ruto announced on December 9, increased from three percent less the average T-bill rate previously.
Those not seeking loans on Hustler Fund can opt into the saving product and load in money as savings.
