Why civil society wants Hustler Fund scrapped

A report by a human rights organisation wants President William Ruto’s pet project, the Hustler Fund, scrapped, saying it is a political tool that has failed to serve the purpose it was intended.

The report authored by the Kenya Human Rights Commission (KHRC), which borrows some of its findings from Auditor General reports, says the fund is operating at a net loss of 71.5 per cent.

This figure is largely contributed by the 68.3 per cent default rate by December 2023. By then, over Sh9.6 billion had been disbursed, but KHRC says there was no measurable impact on enterprise development and job creation.

The legality of the fund has also been put into question by Busia Senator Okiya Omtatah, who insisted that it should not draw its finances from the Consolidated Fund.

National Assembly Committee on Implementation Chair Raphael Wanjala, who also attended the launch of the report, said if its findings are brought to the House through the relevant committee, he will foresee its decommissioning.

The report, Failing the Hustlers, notes that while it is evident that the fund has reached many beneficiaries as per the figures often shared by the government, the real question is if it has served its intended purpose.

“Concerns exist whether the goal is to push loans to as many people as possible or if the priority should be ensuring that these funds meet the financial needs of the intended recipients,” the report says.

KHRC says the fund’s highly politicised origins and centralised structure undermine its legitimacy. As such, it does not respond to genuine financial needs of the borrowers.

“Instead, it serves as a post-election reward mechanism tool for political messaging,” the report says in its recommendations.

The fund was set up in November 2022 by President Ruto with a seed capital of Sh50 billion. Its intention was to repair the credit record of individuals, particularly owners of small businesses, who had been negatively listed and could not access formal financing.

The fund has since morphed to offer business loans to groups and individuals, overlapping mandates of already existing funds.

MSMEs Cabinet Secretary Wycliffe Oparanya and Principal Secretary Susan Mang’eni said the KHRC report was skewed and failed to reflect the current status of the fund.

Oparanya questioned the report’s methodology, noting it focused solely on the fund’s performance during its infancy between November and December 2022.

“The fund was just weeks old. Drawing conclusions from one month’s data is misleading,” he said.

“If the commission were genuine in their findings, they would have engaged us and sought clarification,” said Oparanya, accusing KHRC of weaponising the Auditor General’s 2022–2023 audit for political ends.

In February, Oparanya requested Sh8 billion allocation for loans and Sh400 million towards recurrent expenditure of the fund.

The report recommends the billions allocated to Hustler Fund be channelled to Women Enterprise Fund (WEF), Youth Enterprise Development Fund (YEDF), and Uwezo Fund.

It references the Auditor General report for 2022/2023, where Sh10.9 billion out of Sh32.0 billion disbursed in the year stood unpaid. This is a default rate of 32.4 per cent.

However, WEF is said to have a repayment rate of 92 per cent, from the analysis offered in the KHRC report.

KHRC Executive Director Davis Malombe said the findings of the report mimic the government’s current overdrive on empowerment initiatives, led by Deputy President Kithure Kindiki, where it is dishing out cash from questionable sources to groups.

He described the Hustler Fund as a political gimmick disguised as an economic empowerment programme.

“It is totally flawed, economically unsustainable, politically compromised, run in a way which is extremely unaccountable,” he said.

He argued that the Sh1,000 loan sizes were too small to make economic significance in the lives of the borrowers, and the payment period of 14 days was unrealistic.

“There was no regulatory framework on loan recovery, with estimated total cost to the taxpayer reaching 71.5 per cent. This points to an economic sinkhole and a human rights disaster,” he said.

KHRC’s call to disband the fund was also supported by Transparency International Executive Director Sheila Masinde. She said it was initially expected that the fund would be self-sustaining. “Why do we continue to put money in a fund yet we cannot fund basic needs like education and health?” she posed.

She called for a special audit to ascertain the value for money, efficiency, effectiveness, relevance, and sustainability.

Omtatah questioned the legality of the fund, saying such funds are being used to siphon public resources.

“One of the major ways money has been stolen from the Consolidated Fund is by establishment of these funds. They are being audited without their constitutionality being questioned,” he said.

He said Hustler Fund cannot purport to solve the liquidity challenges among small businesses, averaging the financial gap at Sh8 trillion.

“Even if it was well-intentioned, at the current Sh60 billion (exchequer allocation to Hustler Fund), that is about 0.06 per cent of what is required, and so it becomes dangerous tokenism. You think that something is being done when nothing is being done,” he said.