Kenyans made some 600 borrowing requests per second yesterday shortly after the government unveiled the USSD code for the disbursement of Hustler Fund loans.
President William Ruto yesterday launched the much-awaited Hustler Fund, which was part of his key campaign promises. With the digital platform going live, millions of Kenyans were able to register, check their loan limits and apply for loans.
To be eligible, one must be at least 18 years old, have a national identity card and a registered SIM card and mobile money account with Safaricom, Airtel or Telkom.
Further, their lines must have been in use for at least 90 days. This means that if you buy a new SIM card today and register it solely for the purpose of getting the loan, you will not be eligible.
To borrow, an individual dials *254# from any of the three mobile phone network providers. They can also use the mobile applications of the three telcos to apply for a loan.
President Ruto launched the personal finance product, which is among the four loan products provided by the Hustler Fund. The others – microloans, small and medium-sized enterprises (SMEs) loans and start-up loans – will be launched at a later date.
“We will unshackle millions of Kenyans from the chains of debts that they are unable to pay,” said the President.
KCB Bank and Family Bank are the implementing banks of the fund.
The personal finance product offers individuals a minimum loan of Sh500 and a maximum of Sh50,000.
For a start, individuals have been given different loan limits based on their creditworthiness. Thus, borrowers who repay their loans on time will get their loan limits increased gradually up to a maximum of Sh50,000.
Thereafter, the loan limit will be adjusted depending on how the borrower services his loans.
After borrowing, 95 per cent is deposited in your money wallet while 5 per cent of the loan will automatically go towards your savings. President Ruto said that the government will contribute Sh1 for every Sh2 that a borrower will save in the Fund.
Some 70 per cent of the savings deductions will go towards long-term savings in your pension account while 30 per cent will be short-term savings.
The loans are to be repaid within 14 days and are charged an interest of 8 per cent per annum or 0.02 per cent daily. This means that if an individual borrows Sh500, he or she will repay a total of Sh501.53 after 14 days.
The loans will be repaid through the same USSD code from mobile money wallets.
Individuals who will borrow the money erroneously will not be allowed to reverse it; they will have to repay it with interest.
Further, the loan cannot be transferred to another number, and a borrower will not be able to use more than one phone number to borrow.
If a customer does not repay the loan within 14 days, their credit rating is downgraded, which means their loan limit will be lowered. If the borrower goes a further 15 days without repaying, the interest rate charged on the loan rises to 9.5 per cent per year.
But should the default extend to more than 30 days, the borrower loses all the credit scores accumulated and the Hustler Fund account is frozen, denying them a chance to borrow again from the Fund.
However, borrowers have been handed a reprieve as their borrowing data will not be shared by credit reference bureaus. Therefore, a default on the Hustler loan will not affect their credit history with other lenders.
Further, a frozen account does not spell the end for a borrower; they can repay the loan at once or in instalments and begin borrowing again.