Individuals who have defaulted on Hustler loans will soon have the unpaid debt deducted from their M-Pesa accounts and airtime in the struggle to recover more than Sh7 billion from the 13 million defaulters.
Hustler Fund acting chief executive Elizabeth Nkukuu told a parliamentary committee that they are engaging mobile phone operators such as Safaricom on how to recover the unpaid loans from their subscribers.
Ms Nkukuu told the Special Funds Committee yesterday that most defaulters tapped the loans in the first two months of the fund launched 18 months ago.
Official data show that about 24 million customers have accessed loans from the fund, but about two million Kenyans have achieved a high credit rating by making timely and full repayments.
Last month, the fund indicated that non-performing loans had hit 21 percent, quoting unpaid loans of Sh11 billion against the banking average of 16.3 percent.
“This is a conversation that is still ongoing with the mobile operator to deduct the amount from airtime and M-Pesa,” Ms Nkukuu told the committee, adding that all legal means would be used to recover the taxpayers’ cash.
Nagging recovery
She revealed that for every amount borrowed, five percent is retained as savings for the members and the deposits currently stand at Sh3.5 billion.
The government hopes to reintegrate two million Hustler Fund borrowers into the mainstream credit market and have them as loan recipients from commercial banks.
The government views the Hustler Fund as a rehabilitation programme for Kenyans previously barred from borrowing by regular financial institutions due to the listing of adverse credit information at reference bureaus (CRBs).
Ms Nkukuu reckoned that the defaulters have declined to settle the debt given that the majority have an average monthly transaction of Sh21,000 on their mobile money wallets.
“They are people of means, it’s not that they cannot pay, they are people who just don’t want to pay,” she said.
“We will use a nagging recovery method whereby we will be calling the defaulters to remind them to pay. After this is when we now use legal means to get the money from their wallets or airtime.”
About 98 percent of the defaulters are active on their mobile phones and have near-daily transactions on their M-Pesa accounts.
“We have checked the numbers, and it shows that 98 percent are still active. That gives us hope that we can still recover the money. To those who have borrowed and died, we have no option, there is nothing we can do about it but they are only about two to three percent,” said Ms Nkukuu.
It also emerged that the fund has no insurance, with MPs raising the alarm that it could be difficult to recover the Sh7 billion.
The push to make recoveries from defaulters of the fund comes amid controversy after Auditor-General Nancy Gathungu pointed to irregularities within the initiative.
The fund, for instance, issued loans worth Sh465 million to 809,351 Kenyans who had not registered for the product within the first seven months of the entity’s operations.
The Hustler Fund was launched in March 2023 as part of President William Ruto’s manifesto to uplift low-income groups. The fund has been issuing loans between Sh500 and Sh50,000 to individuals for 14 days at an interest rate of eight percent per annum.
The committee directed the CEO to submit a list of defaulters based on their constituency.
Micro, Small and Medium Enterprises PS Susan Mang’eni said they have all the details of those that have defaulted and will go for them.
“We are going to segment them, then we institute a forceful recovery. We know them (defaulters), we have their mobile numbers, unique identifiable numbers and their ID numbers with us,” she said.
Ms Mang’eni told the committee that it’s been almost two years since the fund was launched, which is enough grace period for the repayment of the money borrowed.
Launched in November 2022, the Hustler Fund is among the political promises Dr Ruto made while campaigning ahead of the August 2022 General Election.
The main aim of the fund is to advance affordable credit to masses that were locked from mainstream financial institutions.
