When Dr William Ruto is sworn in as President tomorrow, many will be eagerly waiting for fulfilment of the economic pledges that he made to desperate, broke, jobless and starving Kenyans during the campaigns, either in his manifesto or at public rallies.
This is despite the hard-bare truth that the new government will have little headroom to implement its manifesto after paying salaries, meeting debt obligations and distributing equitable share to the county governments.
My immediate interest, though, will be the Sh50 billion-a-year fund to micro, small and medium businesses (MSMES), the ‘Hustler Fund’ in the Kenya Kwanza manifesto. We have been on this path before, with entities such as the Youth Enterprise Fund and the Women Enterprise Fund. They performed below par or were involved in scandals.
Of particular interest to me would be the credit risk management framework that will be deployed, given the failure of previous funds. For a government-driven fund, I am keen to see how credit analysis, mitigation and governance processes will look like with Hustler Fund.
Secondly, I expect the board and the CEO to be subjected to professional and moral suitability test as senior managers of tier-2 commercial banks. The Central Bank should have oversight over the fund; in any case, Sh50 billion yearly is not pocket change. It is many times bigger than the women and youth funds.
Thirdly, is there anything for free really? Are freebies sustainable in the long run? We need to introduce competitive interest rates (even below the market rate) to meet operational costs of administering the fund.
What would prevent a smart, investment-savvy Kenyan from doing nothing but investing the funds in Treasury bills or even unit trusts for a few months to earn “free interest income” at the expense of the other taxpayers?
On credit risk, I hope a little more thought will be deployed before we create another pool of non-recoverable loans. Clearly, chiefs and assistant chiefs should not be engaged as loan collection officers on behalf of a public fund as was the case in the past.
Besides, the threat of listing the youth and struggling entrepreneurs with credit reference bureaus (CRBs) will not improve repayment levels. The recent listing of negative credit information by digital lenders had no positive impact on collections.
Lastly, if medium enterprises will also be funded, what, then, will be the role of commercial banks? Ideally, it’s the micro and small enterprises that require support due to their weak cash flow positions and lack of adequate collateral for bank loans.
Maybe this is the fund to liberate many from financial enslavement by digital lenders and “logbook” shylocks who prey on the financial desperation of the struggling urban poor and lower middle-class.
Humphrey Njeru, Nairobi