Nairobi — President William Ruto has defended the legality of the Sh50 billion Hustler Fund following widespread criticism that it is operating illegally.
The Head of State said his administration invoked Article 223 of the Constitution to approve the budget being implemented in the distribution of the fund launched late last year.
“We made regulations, did public participation and eventually it was passed by Parliament. Nothing in the Hustler Fund is against the law,” he told a joint TV media interview on Wednesday night.
In response to the claims that the Kenya Kwanza government unlawfully implemented the Hustler Fund with the monies not approved by the National Assembly, the President said his government invoked the constitution since Parliament had not officially commenced sittings.
The president said Sh12.5 billion had been borrowed by Wednesday evening, correcting his earlier interview granted to Swahili news bulletins at 7pm that Sh21 billion had been borrowed.
Article 223 of the constitution stipulates that the national government may spend money that has not been appropriated by Parliament but the expenditure must, however, not exceed 10 percent of the appropriated funds.
“It was not passed by Parliament because he was not part of the plan in the previous administration. The law allows us to use Article 223 in case of emergency and it will be scrutinized and ratified by Parliament in February,” Ruto stated.
The government can also spend under Article 223 if a need has arisen for expenditure for a purpose for which no amount was appropriated by the National Assembly.
A section of Azimio lawmakers had termed the fund unlawful arguing that it had not been appropriated by Parliament.
At the same time, Ruto responded to the jitters that the 5 per cent of every amount deducted from the borrowed fund and saved on behalf of the borrower may be diverted to other government responsibilities.
Elicit reactions had emerged when the government pledged to top up members’ contribution on a 2:1 basis bearing in mind that previous initiatives have flopped.
“Our decision is that the money will not be diverted anywhere else but will be invested government securities. The government securities are the surest; they will be no defaults or challenges,”
“It’s not money to buy plots or buying shares, it might be swamped there in the process. Kenyans can monitor their savings online,” he said.
He revealed that the Hustler Fund has been a total success thus far mentioning that the fund launched on November 30th last year is currently self-sustaining.
The Head of State thanked Kenyans for ignoring advice from his rivals in the Azimio La Umoja coalition led by Raila Odinga who had told Kenyans to borrow and not repay the loan on a low interest.
“When we launched this fund, a lot of politicians told Kenyans to take the money and not repay back, telling them that it’s useless. But today the money that is being re-payed is more than being borrowed,” the President stated.
He expressed optimism that the fund will grow even further.
“Ignore anyone telling you that this fund is not working, I can tell you that we have 5 million repeat borrowers and Sh700 million in savings made so far in the fund and this is just the first month.”
“The fund is currently sustaining itself, Kenyans ignored those politicians. Those politicians pay their loans in Parliament and they are busy telling Kenyans not to pay back their loans,” Ruto said.
In the statistics he unveiled during the live interview held at StateHouse, he said that 17.5 million Kenyans have enrolled for the fund with 5.5 of them having borrowed more than once.
On 30th of January, the government will embark on a credit scoring of Kenyans enrolled on the fund so as to guide the government on how much loan to approve to the borrower.
Getting the amount is dependent on the borrower’s credit score, such that individuals with poor credit scores will be charged higher interest, plus possible penalties.
The government deducts 5 per cent of every amount borrowed from the fund and saves it on behalf of the borrower.
“For those who will have borrowed 500 and successfully paid back, we will tell them because you have paid back in time for three or four times. We will increase your borrowing amount to Sh 1000 because we want to increase the borrowing amount to Sh 50, 000,”Ruto said.
The loan limits for individuals from the fund were set at a minimum of Sh500 and a maximum of Sh50, 000.
The Head Of State pointed out that in February the government will launch the Phase Two of the Fund which will cater for Sacco’s and other small institutions
The second phase to give Kenyans in finance groups an equal opportunity to borrow at a small interest to boost their businesses.
The fund is expected to have a total of four products Personal Finance (which has already been launched), Micro-Loan, SME Loan and Start-Up Loan.
To be eligible, one must be at least 18 years old, have a national identity card and a registered SIM card and mobile money account with Safaricom, Airtel or Telkom.