The government is now considering writing off bad loans worth Ksh.6 billion that were borrowed by 10 million Kenyans in 2022. This was revealed by Micro, Small and Medium Enterprises Development Principal Secretary Susan Mang’eni when she appeared before the National Assembly’s Committee on Trade, Industry and Cooperatives.
According to Mang’eni, the borrowers have failed to pay their loans more than two years after they received the money. Despite this, she defended the performance of the fund and told the MPs that 9 million other borrowers are still actively borrowing and paying back their loans.
Mang’eni explained that out of the total Ksh.65.7 billion disbursed through the fund, about Ksh.53.2 billion has already been repaid. But she admitted that around Ksh.5 billion to Ksh.6 billion remains in default and is at risk of never being recovered.
She said that the ministry is planning to write off these bad loans and focus on supporting those who are doing well with repayments. She further asked MPs to approve an extra Ksh.5 billion for the fund in the coming financial year.
According to her, this money will help in upgrading loan limits for 4.5 million borrowers who are progressing from small loans of Ksh.500 to bigger loans of up to Ksh.10,000.
The request has, however, raised concerns among lawmakers. Some MPs feel that the Hustler Fund, one of President William Ruto’s biggest campaign promises, is not being managed properly. They questioned the idea of writing off such a huge amount, especially at a time when the country’s economy is already facing many challenges.
Starehe MP Amos Mwago said the government should not continue forgiving such large amounts because it could create a bad habit among borrowers who may think they never have to repay loans.
Mang’eni said the ministry is considering changing laws to allow for forceful recovery of unpaid loans. She believes this would help make sure that the money is repaid and can be used to support other Kenyans in need.
When the Hustler Fund was first introduced, it was seen as a powerful tool to support small businesses and give hope to many low-income earners. The promise of quick loans at low interest rates encouraged over 25 million Kenyans to sign up within two years. But with nearly half of them now having defaulted on their loans, the project is under serious pressure.
This development raises fresh questions about the sustainability of the fund and whether the government’s approach to uplifting small-scale businesses through credit is working as planned.
