The National Treasury has issued the National Assembly a carte blanche in appropriating resources to the Financial Inclusion Fund, popularly known as the Hustler Fund.
The Prof Njuguna Ndung’u-led Treasury has done away with the Sh50 billion funding ceiling that had been prescribed in the draft regulations, leaving it to the discretion of the National Assembly to determine the maximum resources to be gobbled up by the fund.
The regulations are in Legal Notice 213 published by Prof Ndung’u, on November 23, 2022.
Section Six of the final Hustler Fund Regulations provides that “the capital of the Fund shall be as appropriated by the National Assembly or from any other source provided for under regulation 4 of these Regulations”.
This is a stark departure from the provision in the draft regulations which stated that “the maximum capital of the Fund to be appropriated by the National Assembly shall be 50 billion shillings”.
The National Treasury has also done away with the ceiling that had been prescribed in the draft regulations with regard to the maximum amount of the fund’s capitation that can be taken up by administrative expenses.
Whereas the draft regulations provided that Section 21 of the draft regulations provided that “the administrative costs of the Fund shall not exceed three percent of the approved budget of the Fund,” the final regulations simply provide that “the administrative costs of the Fund shall be met through appropriations of the State Department responsible for matters relating to Micro, Small and Medium Enterprises” without indication of a ceiling.
Another major change in the final Hustler Fund regulations is that persons who default on loans will be slapped with an interest rate 150 basis points higher (1.5 per cent higher) than the standard interest rate of eight per cent.
This means that those who default on loans from the Hustler Fund will pay an interest of 9.5 per cent unlike the eight per cent that will be the standard rate.
“The interest or administrative fee payable by a beneficiary on a financial service or product advanced under these regulations shall be at a maximum rate of eight per centum per annum on reducing balance provided that where a beneficiary defaults, the interest or administrative fee payable shall be nine and one half per centum on a reducing balance,” Section 22 of the final regulations states.
The final regulations have also widened the product array offered by the Hustler Fund to include retirement benefits. The draft regulations had provided that the fund would offer credit, saving, insurance and investment products.
The Kenya Kwanza administration has repeatedly called for review of primary retirement benefits pillar through enhancement of statutory deductions to the National Social Security Fund (NSSF) in line with the NSSF Act of 2013 which sought bump up contributions to six per cent of one’s pensionable income.
The Hustlesr Fund, President Ruto’s key election campaigns promise, will see Kenyans aged 18 and above and businesses with a turnover of Sh100 million and below qualify for loans.
Borrowers with poor credit scores will be charged higher interest, while those who service their loans on time will have the advantage of lower rates.
The Board of the Financial Inclusion Fund will have the power to set conditions for access and rates for borrowers using a credit scoring framework.
This is expected to reveal the profile of borrowers that the Kenya Kwanza government is targeting.
Other functions of the board will be to develop policies to guide savings for borrowers, the eligibility criteria, online application procedure, approval, disbursement and loan repayment.
“Anyone who intends to take a personal loan, start a business or is in a business whose turnover does not exceed Sh100 million will be eligible to borrow from the Fund,” the regulations say.
Banks, micro-finance institutions, cooperative societies and other associations will be allowed to borrow from the Fund for onward lending.