Nairobi Kenya — President William Ruto has announced the creation of the Hustler Fund Behavioral Credit Rating System that is aimed at expanding credit accessibility to borrowers who repay within the stipulated 14 days.
Ruto also launched the Bridge Loan product, which will enable good borrowers to access larger credit amounts and enjoy a longer repayment period.
The Hustler Fund Credit Rating System assigns all beneficiaries of the fund a score ranging from A1 (very good) to C3 (very poor).
The score has nine bands: A1, A2, A3, B1, B2, B3, C1, C2, and C3 to indicate creditworthiness.
"We are assigning a credit score to every borrower so that this becomes their new collateral," the President said.
Depending on the score, some beneficiaries will double or even triple their current limits.
He added that more than two million beneficiaries have demonstrated good borrowing behavior, and their positive credit behavior will reward them with higher limits based on their credit worthiness.
President Ruto said the credit score will be automatically adjusted to a beneficiary's borrowing pattern, thus ensuring transparency in the process.
"You don't have to know the chief, the Principal Secretary or the President to get a good credit rating - all you need is your phone," he said.
The President urged banks and other financial institutions to use the credit score rating data from the Hustler Fund to assess the creditworthiness of their customers, especially those who have taken loans from the Fund.
Meanwhile, the bridge loan will transition good borrowers to the mainstream financing sector by exposing them to the banking environment.
The beneficiaries will establish relationships with banks and start gaining the banking experience. Their credit history will inform their bankability.
The repayment period for the loans has also been increased from 14 days to 30 as requested by borrowers. The interest rate remains unchanged at 8 percent a year.
The product also provides enhanced loan limits depending on the behavioral rating score, allowing beneficiaries to substantially increase their current limits.
"Good borrowers will be able to triple their credit limits. Those who are at KSh50,000 will now be able to borrow up to Sh150,000, while those at Sh5, 000 will move to Sh15,000 and so on," he said.
In the two years of the Hustler Fund, it has established credit profiles of 24.7 million Kenyans who have so far benefitted from the Fund's inaugural personal loan product, which has disbursed over Sh60 billion.
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In addition, borrowers of the fund have saved KSh3.4 billion in mandatory savings of 5 percent per borrowing, with 70 percent going to long-term savings and 30 percent to short-term.
The President also announced that long-term Hustler Fund savings will be managed by the Kenya National Entrepreneurs Savings Trust, a government pension scheme for Kenyans in the informal sector.
"Instead of putting your money in the bank where it earns 4, 5, or 6 per cent interest, KNEST will give you the Treasury Bill's rate which currently stands at 11 per cent," he said.
