Stop issuing threats and persuade Kenyans to repay loans

Opinion
By Patrick Dan Mukhongo | Mar 12, 2025
President William Ruto during the launch of the Hustler Fund in Nairobi. [File, Standard]

Reports that 13 million individuals have defaulted on Hustler Fund loans totaling more than Sh7 billion are disturbing. The Hustler Fund was meant to accord ordinary citizens an easy access to credit at fairly lower interest rates and easier administrative strictures.

Loans are classified as non-performing or defaulted if the borrower has not made repayments of principal and or interest for at least 90 days. In the case for Hustler Fund loans, majority of the defaulters borrowed in the first and second months of the launch of the credit facility in November 2022.

To put it in context, most of these borrowers had been listed by other creditors at the Credit Reference Bureaus (CRBs) for various loan balances that they owed. However, to improve their credit rating to allow for approval of the Hustler Fund loans, a campaign was pushed that these individuals owed small balances and hence needed to be delisted.

CRBs are simply repositories that carry credit history of customers with  information being provided by credit providers who are authorised by Central Bank of Kenya such as commercial banks, microfinance institutions and savings and credit cooperative societies through credit information sharing. Where customers default on loans, credit providers furnish CRBs with negative credit information.

In 2023, there were reports that the government had removed seven million Kenyans from the CRB listing, begging the question, did those owed by these individuals get indemnified or on what basis was the clearance done?

These individuals were being cleared from CRB listing in order to qualify for Hustler Fund loans, yet these were already defaulters elsewhere. Is it any wonder that they have now defaulted on the Hustler Fund loans?

Default on loans occurs because a customer is either unwilling to pay or unable to pay. In the case of Hustler Fund loans, reports indicate that upwards of 90 per cent of defaulters are active users of mobile money platforms and undertake regular transactions, inferring that they are simply unwilling to repay their loans.

Did the initial messaging during the campaigns that the Ruto government would provide funds to small-scale business people breed confusion? Did most of the defaulters assume that these were free funds; that they did not have to repay? Or could it be that all the 13 million customers who are not servicing their loans are indeed serial or pathological defaulters who have taken it as a past time?

This is a real conundrum for the government which has to find ways of recovering the mind-numbing amount whose non-performing loan status is about 21 per cent, way above the banking average of 16.3 per cent.

The government needs to move away from issuing threats and engage in moral suasion by  appealing to these customers to pay back the money. It should develop a questionnaire to establish salient aspects about loan use, whether taken for business or consumption and if it is the former, what is the business’ status.

Defaulters can be encouraged to visit Huduma Centres and sub-county headquarters where the government collect information about individual challenges. It should negotiate with them their preferred repayment schedules.

Dr Mukhongo is a project management consultant

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