State-funded hustlers pension fund fails to take off

Enterprise
By Graham Kajilwa | Jul 30, 2025

Close up view of old dirty rough elderly retired woman hands. Small pension concept. [Courtesy]

The Auditor General has poked holes into the Hustler Fund pension kitty, Kenya National Entrepreneurs Savings Trust (Knest), detailing how the agency gobbles up Sh130 million annually with little to show for what it has delivered on its mandate.

The report by Nancy Gathungu shows how the director of the agency under the National Treasury awarded themselves more than the recommended pay in the audit report that covers the financial year ending June 2024.

According to the report, of the Sh130 million expenses in the period, the director’s emoluments were Sh21.5 million.

This is against an approved budget of Sh18.4 million. As such, there was an over-expenditure of Sh3.04 million, equivalent to 17 per cent of the budget.

However, what stands out in the audit is how the agency that was meant to offer pension services to entrepreneurs has yet to begin its mandate.

This is even as the report raises questions on the more of the recommended meetings and corresponding allowances paid in the period.

The report states that the Knest board held 12 full board meetings during the financial year, comprising four ordinary board meetings and eight special board meetings.

“The management did not provide justification or approval from the Cabinet Secretary – The National Treasury for the extra meetings as required in the circular from the Head of Public Service OP/CAB.9/A dated March 2020,” the Auditor General’s report reads.

According to the report, the agency’s statement of profit or loss and other comprehensive income reflects administration expenses of Sh130 million. Included in the amount is the director’s emoluments of Sh21.5 million.

“The director’s emoluments were Sh21.48 million against an approved budget of Sh18.4 million, resulting in an over-expenditure of Sh3.04 million, equivalent to 17 per cent of the budget,” it says.

“However, the over-expenditure was not approved.”

The Auditor General documents that the Trust was incorporated on December 9, 2021, and the board members were gazetted on December 17 of the same year.

“The Trust Deed and Rules signed on November 12, 2021, identified the main purpose and objective of the Trust as provision of pension and other prescribed benefits for members upon their withdraw from the Scheme and relief for the dependents of deceased members in case of death,” the report for the year ended June 30, 2024, says.

It adds that to meet the above purpose, the Trust shall hold the contributions paid to them by members and any other monies, investments and income and all lump sums.

These monies are to be held in trust and distributed to the documented beneficiaries as per the scheme’s rules.

“At the time of audit in November 2024, three years since the incorporation, the Trust has not embarked on enrolling the public to achieve the mandate of providing pension for members in the informal sector,” the Nancy Gathungu report says.

“In the circumstances, the Trust may not justify the delay in implementation of the mandate despite being fully funded by the National Treasury.”

The Auditor General’s report notes that the statement of comparison of budget and actual amounts reflects actual receipts and payments on a comparable basis of Sh181.7 million and Sh118.4 million, resulting in under-utilisation of Sh63.2 million or 35 per cent of the actual receipts.

“In the circumstances, the under-utilisation affected the planned activities and may have impacted negatively on service delivery to the public,” the report says.

Knest’s Board of Trustees was launched in March 2023 by then National Treasury Cabinet Secretary Prof Njuguna Ndung’u and his then counterpart for Cooperatives and Micro, Small and Medium Enterprises (MSME) Simon Chelugui.

Prof Ndung’u then reiterated how the Kenya Kwanza administration is keen on improving the social welfare of citizens, the majority of whom are engaged in the informal sector.

As such, they are not able to access pension plans in the market, which largely target formal employees with a structured earning pattern, often monthly.

Knest was then supposed to solve this issue by providing entrepreneurs in business to set aside part of their earnings as a pension. These earnings would then be paid to the beneficiaries as per the scheme’s rules.

Knest was registered by the pension regulator, the Retirement Benefits Authority (RBA), in February 2022 as an individual pension plan.

Prof Ndung’u then pointed out that the pensions sector lacks a suitable infrastructure that will provide for pensions, as well as a savings channel for fostering efficient and affordable MSME economic resilience.

“This is because this sector has been neglected for far too long that it has a high deficiency of trust,” he said.

He said an affordable pension product offered with high efficiency in a secure and transparent environment is what will build confidence in this segment and encourage uptake of the pension product.

“Knest is mandated to extend pension coverage to the informal sector, which existing institutions could not serve. The existing pension savings arrangements are not designed to manage micro-contributions and therefore end up providing meaningless returns on micro savings,” he said.

Knest, according to a statement from the National Treasury upon the unveiling of the board of trustees, was to anchor the savings portion of the Hustler Fund.

“Knest was identified by President Willian Ruto to implement the long-term (retirement) and short-term savings aspects of the Financial Inclusion Fund (Hustler Fund). The scheme has a mandatory savings channel which will anchor the savings component of the Hustler Fund and a voluntary savings channel for those who do not wish to borrow,” reads the statement from the National Treasury.

Latest figures from Hustler Fund show that Sh67.3 billion has been disbursed so far, with Sh3.3 billion retained as savings.

With the Auditor General indicating that Knest is yet to start on its mandate, it is now not clear how the savings portions of the Hustler Fund are being managed.

Hustler Fund deducts five per cent of the disbursed loan and apportions it to savings, where 1.5 per cent is put into short-term and 3.5 per cent into long-term.

The government has promised to match the long-term savings. 

National Treasury describes Knest on its website as a unique national informal sector pension scheme established by the government to meet the unique needs of the more than 18 million marginalised informal sector workers.

“The scheme has deployed low-cost modern technologies to catalyse a sustainable business model that manages intermittent micro contributions to meet both long-term (pensions demands) and pressing short-term needs that are unique to this sector,” says the ministry. 

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