Numbers don't lie as Hustler Fund's viability questioned
Business
By
Graham Kajilwa
| Aug 06, 2025
Claims by a human rights body that the Hustler Fund is operating at a net loss of 71.5 per cent have raised questions about its business model.
While Cooperatives and Micro, Small and Medium Enterprises (MSMEs) Development Cabinet Secretary Wycliffe Oparanya has dismissed the claims, continuous funding of the fund from the Exchequer has been described as unsustainable.
Members of the civil society said Monday that considering the cost at which the government is borrowing to fill the budget deficit, lending through the fund at eight per cent may not be a good business model.
A report authored by the Kenya Human Rights Commission (KHRC) provides a breakdown of losses arising from the fund.
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For example, by December 2022, the report titled Failing the Hustlers, drawing from the Auditor General Nancy Gathungu’s findings, showed that over Sh9.6 billion had been disbursed. The default rate at the time stood at 68.3 per cent.
The report breaks this down further, stating that with a budget deficit of 3.5 per cent of the country’s gross domestic product (GDP), the government is forced to borrow mainly through Treasury Bills (T-Bills).
At an average T-Bill rate of 8.2 per cent (as of December 2022), plus the three per cent operational cost mandated by law, the real cost of credit balloons, the report says.
“Considering all this, the total estimated cost of the Hustler Fund to the taxpayer is a shocking 71.5 per cent. (68.3 per cent + 8.2 per cent +3.0 per cent -8.0 per cent),” the report explains.
“This rough calculation shows that the government runs a loss-making scheme disguised as economic empowerment.”
Hustler Fund was unveiled in November 2022, with a seed funding of Sh50 billion as announced by President William Ruto.
T-Bill rates, however, went further up to hit 16 per cent in early 2024, with Treasury bonds promising a yield of 18 per cent, making credit more expensive for the government.
As such, this variance on net loss would have gone up further to 79.3 per cent if the default rate remains constant.
CS Oparanya has come out to defend the operation of the fund, claiming the fund did not receive a seed capital of Sh50 billion as previously announced.
“The amount so far injected into the fund is Sh14 billion, which has been reinvested in a portfolio of over Sh72 billion as of today,” said CS Oparanya on Monday, responding to the KHRC report.
“The dependency on the Exchequer has significantly reduced as the fund diversifies into graduation products co-created with the banks to facilitate entry into the formal financial systems.”
In the 2023-2024 budget cycle, the fund was allocated Sh10 billion. In 2024-2025, the allocation went down to Sh5 billion, while in the current financial year, it has dropped further to Sh300 million, in what could signify the fund’s self-sustainability or that the government is wary of investing more money into it.
The CS brushed off claims that the default rate is at 68.3 per cent, saying KHRC only looked at data between November 2022 and December 2022.
“The average (default rate) is 20 per cent,” he said, acknowledging its teething problems.
“We accept, then, people borrowed and disappeared because most of them thought this was a political gimmick.”
But the Auditor General’s report for the year ended June 2024 on the fund shows the default rate is still high.
Ms Gathungu’s report shows the statement of financial position showed a receivable balance of Sh13.6 billion, including Sh1.2 billion as interest, and Sh12.3 billion as principal amounts loaned out.
“However, records provided indicated that approximately Sh8.7 billion or 64 per cent of the fund’s total loans receivables as at June 30, 2024 were outstanding for more than one year hence casting doubt on whether the fund will recover the loans issued to borrowers,” the report says. The KHRC report argues that the positives of the fund end at the eight per cent interest that graduates to 9.5 per cent when one defaults since it is affordable when comparted to commercial bank rates.