Government Considers M-Pesa Deductions as Hustler Fund Struggles with Loan Recovery

The Hustler Fund, officially known as the Financial Inclusion Fund, is grappling with significant challenges in loan recovery.

Acting CEO Elizabeth Nkukuu has informed Members of Parliament that the fund has reached an impasse in its efforts to recoup outstanding loans. A substantial portion of defaulters acquired loans during the initial two months of the fund’s operation and have yet to fulfill their repayment obligations. In response to this crisis, the government is contemplating accessing M-Pesa accounts of defaulters to recover the Sh7 billion owed. This approach would include deducting funds when defaulters purchase airtime, a strategy aimed at maintaining the fund’s viability. Since its launch, the Hustler Fund has extended billions in loans to 13 million Kenyans, many of whom have failed to repay.

Nkukuu reveals that the majority of defaulters are individuals with financial means, as evidenced by their mobile money transaction history. Despite receiving regular reminders during transactions, these borrowers have remained unresponsive. Analysis of their mobile transactions indicates an average monthly transaction volume of Sh21,000. The National Assembly’s Special Funds Account Committee, led by Migori Woman Representative Fatuma Mohammed, scrutinized the fund’s management and the absence of insurance for the disbursed billions. Committee members, including MPs Majimbo Kalasinga and Rahim Dawood, have expressed concerns about potential losses of taxpayer money due to these vulnerabilities.

When questioned about insurance coverage, Nkukuu confirmed that the funds are not insured, necessitating the consideration of forceful recovery methods. The committee has instructed fund officials to provide comprehensive information on the 13 million defaulters within a fortnight. Nkukuu’s appearance before the committee was in response to audit queries for the 2022/23 financial year. President William Ruto launched the Hustler Fund on November 30, 2022, with an initial capital of Sh12 billion, targeting individuals at the lower echelons of the economic pyramid. However, an audit by Auditor General Nancy Gathungu uncovered several irregularities, including loans granted to unregistered individuals.

The fund’s policy stipulates that only registered customers are eligible for loans. During the review period, 1,304 unregistered persons received loans totaling Sh1.7 million. The audit also revealed instances of duplicate loan identity numbers being used to process multiple loans. The government’s proposed plan to access M-Pesa accounts and deduct funds from airtime purchases has ignited a debate on data privacy and legal frameworks. This proposal must navigate the stringent provisions of the Data Protection Act, which prohibits unrestricted access to personal data except in cases of national security or public interest. The Law Society of Kenya has previously opposed similar measures, citing constitutional privacy rights.