Unpaid State revolving fund loans hit Sh18.4bn

The government is owed Sh18.4 billion in unpaid loans disbursed to Kenyans through its three revolving funds, Hustler Fund, Uwezo Fund and Women Enterprise Development Fund.

Details about the loans disbursed through the Youth Enterprise Development Fund, another revolving fund, however, remains sketchy after its chief executive Josiah Moriasi declined to respond to our inquiries.

Of the money still in the hands of Kenyans, Hustler Fund accounts for Sh7 billion, Sh7.5 billion in Uwezo Fund, Women Fund Sh2.5 billion and Youth Fund Sh1.4 billion.

This is despite Auditor-General Nancy Gathungu raising questions on the administration of the fund, that has been previously mired in corruption and other irregularities.

Although the government is planning to raid the M-Pesa accounts and airtime of Kenyans who have defaulted repaying the Hustler Fund to recover the money, it hasn’t outlined the measures to recover the unpaid billions in Uwezo Fund, the Women Fund and the Youth Fund.

Read: Youth Fund budget cut by half to Sh225m

Already, lawmakers want the Hustler Fund wound up after it emerged that the billions the government invested in the fund were not insured and that the fund operated without staff, raising questions on its prudent management.

Hustler Fund acting chief executive Elizabeth Nkuku, while appearing before the Special Funds Account Committee of the National Assembly said the fund has reached a dead end and is now considering forceful recovery means.

“The beauty of this fund is that we have the phone numbers and the unique identifiers of the defaulters, the national ID. They are people of means, they are people who just don’t want to repay,” Ms Nkuku told the committee chaired by Migori County Woman Rep Fatuma Mohamed.

“What we are looking at is to get money from their M-Pesa or airtime. We are also in the process of considering appropriate legal provision,” she said.

The Hustler fund is a digital financial inclusion initiative and was one of President William Ruto’s campaign mantra ahead of the august 9, 2022 general election to improve access to financial services for a majority of poor Kenyans.

Ms Nkuku noted that the 13 million Kenyans who borrowed from the fund, have defaulted in repayment of the Hustler fund and are mostly people who borrowed in the first and second months.

Ms Nkuku revealed to the committee that given their mobile money transactions history, a majority of the Hustler fund defaulters are people of means as they transact an average of Sh21,000 every month.

During the financial year 2022/23, most of the beneficiaries were qualified for a loan amount of between Sh500 to Sh1000.

But even as the government plans to raid the Mpesa and airtimes of the defaulters it is currently “nagging them with constant call reminders every time they make transactions” even as she noted that it is not working.

Uwezo fund disburses its loans at the constituency level through working committees and is meant to assist women groups, youth groups and people living with disabilities to boost their businesses.

Since it was established in 2013 by immediate former president Uhuru Kenyatta, it has disbursed Sh6.8 billion to the 290 constituencies as per the data provided by its CEO Mr Peter Lengepiani.

The data shows that 777,698 Kenyans that included 131,907 males and 641,756 females were members of the 82,241 groups that benefited from the fund.

There are also 346,074 Kenyans who were individual beneficiary groups- 195,470 males and 150,604 females.

The women groups were- 53,280, youths- 26,865 and people living with disabilities- 2,096, benefitted from the Sh8 billion disbursed.

Of the amount loaned out, Sh3.08 has been repaid, which is 41.12 percent with Sh7.5 outstanding.

The Uwezo fund gives two loan products- Wezesha loan, which is for first time borrowers who should get between Sh50, 000 and Sh100,000 to support their enterprises and Endeleza loan for repeat borrowers who qualify for up to Sh500,000.

The Auditor-General has continuously flagged Uwezo fund over mismanagement, warning the imminent collapse of the fund due to the failure to implement prudential financial management policies.

The failure to furnish the auditors with records of groups loaned the money since inception is also a concern over whether the fund is being advanced to the deserving cases.

For instance, Auditor-General Nancy Gathungu in her report on the accounts of Uwezo fund for the year ending June 30, 2021, noted that some of the fund’s constituency offices shut down years ago and taxpayers are staring at a loss.

Ms Gathungu also notes that the Uwezo fund management cannot account for the billions lent out to various groups since the fund’s establishment.

The audit report notes that Uwezo fund offices in Bureti constituency have been dormant since 2016, threatening recovery of the outstanding loans.

Ms Gathungu has further flagged the fund for internal control weaknesses in its administration at the constituency level.

Some of the issues Ms Gathungu has flagged include the management issuing loans to groups without following procedure with no proper means to follow up on the repayment.

“The records revealed deficiencies in documentation, authorization and approvals of loans to prevent irregular loans. Individual loan accounts and details of loan beneficiaries were not maintained for instance in Muhoroni and Khwisero constituencies,” the audit notes.

Some groups were also advanced loans without evidence of approval and completed application forms.

“The effective management and recoverability of the loans may not be achieved. This raises doubt on the controls put in place to implement the activities of the fund to achieve the intended purpose,” warns the Auditor-General.

The Women enterprise fund is also disbursed at the constituency level.

The report of the Auditor-General on the accounts of the Women enterprise fund for the year ended June 30, 2023, has cast doubts on the recovery of Sh2.5 billion due from the Constituency Women Enterprise Schemes (CWES).

The Youth enterprise development fund created to support youth-owned enterprises to access low-cost loans during the Kibaki era has disbursed Sh1.4 billion in loans for the last three financial years providing business support services to 380,000 youths.

However, recoverability of the monies advanced remains a challenge although the fund projects to recover Sh635 million from the outstanding loans.

The fund is earmarked for merger with the other affirmative action fund- Women and Uwezo funds and in the current financial year, its budget was slashed by more than a half.

The fund was allocated Sh225 million for development and recurrent expenditure, a 55 percent reduction from the Sh500 million allocated during the 2023/24 period.

The Auditor-General in her report on the accounts of the fund for the year ended June 30, 2022, has flagged the Sh180.4 million owed by the collapsed Chase bank.

“A review of judgment on a corruption case revealed that the amount was irregularly paid to a supplier,” the audit report says.

The audit report also reveals that during the year under review, the fund continued to register dismal performance, reporting a deficit of Sh123.23 million noting that the poor performance has prevailed over the last seven years.

“This has eroded the capital invested in the revolving fund and impaired the ability of the fund to discharge its mandate and thus casts significant doubt on the ability to sustain its services in the foreseeable future,” Ms Gathungu says.

The members of the Special Funds Accounts Committee also questioned how the Hustler fund is dispensing billions to Kenyans, monies which are not insured.

MPs Majimbo Kalasinga (Kabuchai) and Rahim Dawood (North Imenti) questioned the relevance of the fund pointing at the grey areas that may occasion loss of billions of the taxpayers’ money.

“Can we know if the money was insured and which insurance company? We can recommend the fund to be wound up, how we can give out billions which are not insured?” posed Mr Kalasinga with Mr Dawood saying; “the hustler fund is not working.”

Ms Mohammed directed the Hustler fund acting CEO to furnish the committee with all the details of the 13 million defaulters.

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