The government is funnelling a portion of savings deductions from Hustler Fund loans into a variety of investment channels, including government bonds, bills, and securities vehicles within both the government and private markets.
Concerns initially emerged when the Hustler Fund was launched, centered on the 5 per cent savings deduction applied whenever individuals borrowed from the national fund.
Cabinet Secretary for Cooperatives and Micro and Small Enterprises, Simon Chelugui, addressed these concerns on Tuesday night but failed to allay public doubts about the government's investment strategy.
The controversy is not new. The government last month faced backlash over its decision to invest Ksh20 billion, collected from the affordable housing levy, in Treasury bills and bonds.
Critics questioned the rationale behind diverting funds earmarked for housing projects to financial investments. Analysts attribute this move to the low absorption rate of funds intended for constructing affordable homes for low- and middle-income families.
The government appears to be following a similar path with the Hustler Fund, aiming to maximise returns on the savings collected.
Chelugui clarified that the government has channelled some of the Ksh3.1 billion from Hustler Fund deductions into investments to enhance borrowers' pensions over time.
During an interview with Citizen TV, Chelugui disclosed that the government is still refining the details of how these savings will be managed, nearly two years post-launch.
“We've directed the savings into government bills, bonds, securities, and other secure investments,” Chelugui stated.
The Hustler Fund, launched on November 30, 2022, by President William Ruto, operates with its funds stored in a custodial account regulated by the Retirement Benefits Authority (RBA).
Chelugui further explained that the Ministry is collaborating with the Kenya National Entrepreneurs Savings Trust (KNEST) and the National Social Security Fund (NSSF) to leverage their expertise in managing the resources effectively.
“We are in discussions with KNEST to appoint them as the administrator of the fund, and we are working with NSSF to utilise their service providers,” Chelugui explained.
Chelugui stressed that every loan issued includes a 5 per cent savings deduction, with 70 per cent allocated for long-term pension savings and 30 per cent accessible to borrowers within a year.
Despite a low repayment rate, Chelugui expressed confidence in the government's ability to break even with the investments.
Already, the fund has been on a public relations nightmare after Auditor General Nancy Gathungu last week revealed that some Ksh259 million held by service providers could not be verified due to inadequate documentation from the fund's management.
Her audit indicated that 17,855,858 beneficiaries applied for loans, resulting in a total disbursement of Ksh32,015,962,276.
However, a significant balance of Ksh10,950,075,614 remained unpaid as of June 2023, including interest receivable and outstanding loans.
Chelugui disputed the Auditor General's findings, asserting that all funds have been accounted for.
