President William Ruto yesterday on November 30th 2022, kept his end of the bargain by launching the much-anticipated hustler fund at the Green Park Terminus in Nairobi. The fund which was initially promised at zero interest, was meant to fulfil the objective of providing cheaper credit for micro and small businesses. However, with the change of heart, it has now mutated to loans with interest rates of eight per cent a year. This equals to daily interests of about 0.002%.
Well, I guess this is one of those either glass half-full or glass half-empty perception situations, because fair enough, it does meet the promise of cheaper access to credit right? Since its launch yesterday and anticipation to get access as of today, 1st December 2022, several Kenyans have since queried the access USSD code *254# to check their borrowing threshold.
The Hustler fund is targeted at providing four products. A personal finance, Micro-loan, SME Loan and Start-Up Loan. The only working one upon launch however, is the personal finance product. The others shall be launched in due time. This bottom-of -the pyramid financial services can be accessed under the following conditions:
Hustler Fund Access
One must be a Kenyan citizen aged above 18 years. Consequently, one must have a valid Identification Card. The mobile number of access must be registered under any of the three mobile networks, Safaricom, Telkom or Airtel. Subsequently, a mobile money account on the same network; M-Pesa, T-Kash or Airtel Money respectively, must be active, since that’s where the money shall be deposited. Last but not least, the mobile number must have been in use for at least 90 days to the request.
It is very important to also note that the Hustler Fund identifier, is the ID Number. Therefore, a customer can only borrow from one number, under the same ID.
Hustler Fund is accessible via *254# or respective mobile apps on the three Telco mobiles; Safaricom, Telkom and Airtel. Upon dialling *254#, it shall send you a menu with the different services available. One such is the loan request to check the limit.
Hustler Fund Loans
First things first, the personal finance borrower can access loans between Ksh. 500 and Ksh. 50,000. The qualification is dependant on your credit score card with your telco network provider. It can grow through borrowing more and paying on time through the fund. Remember the interest rate is 8% per year, calculated on a daily. Through a period of 14 days, the loan should then be repaid.
Case: A borrower of Ksh. 1,000. An interest of Ksh.3.60 will be incurred should the borrower pay within the 14 days. Similarly, Ksh. 50,000 attracts Ksh. 153 interest, if paid within the 14 day period.
Second thing to note, once you qualify for a hustler fund, and before it is released, 5% will be automatically deposited to the borrower’s savings account. This is in pursuit of promoting a saving culture among the Kenyans. 70% from the 5% saved shall be deposited on your pension account while the remaining 30% to the short-term savings of the borrower. Interestingly, the short-term savings, offers a 50% return on individual savings by way of government awarding Ksh. 1 for every Ksh. 2 saved so borrowers should keep watch and take advantage.
Case: From Ksh. 1,000 hustler fund loan, Ksh. 50 shall be deposited in to the savings. Ksh. 35 on the pension account and Ksh. 15 to the short-term savings of the borrower. This means what shall be credited to your account is Ksh. 950.
Should you not repay the loan
Moreover, despite not re-paying the money within the fourteen days, the hustler fund gives lee way for a second chance. One shall have additional 15 days to repay though at a slightly increased interest rate of 9.5% per year, which is also broken down to daily and monthly. On the downside though, the credit rating will definitely be compromised in this case.
And if push comes to shove and the borrower defaults for more than 30 days, the borrower loses all their credit scores. Their account is suspended and can only return to it by clearing the arrears. And I as much as no credit reference bureaus are involved, the borrower will have to start building their credit scores again from scratch. Also, interest rates continue to accrue even after the freezing of the account and therefore might call for employment of alternative hustler fund recovery methods eventually.
In as much as the move by the head of state has been received in different breaths, this might be the way to responsible finances. With credits, savings, pensions as well as investments taking centre stage, positive contribution to the economy is expected to be witnessed.
Consecutive roll outs of the other hustler fund services as communicated by the president are expected in phases as well, starting from 3 months from now.