February 12, 2025

Ruto restructuring financial institutions to offer low-cost loans to “hustlers”

Ruto restructuring Kenya’s leading financial institutions to offer free or low-cost loans to “hustlers”.

Yesterday, President William Ruto outlined a number of initiatives to cut borrowing costs and help both individuals and small enterprises.

The changes are intended to enhance financial inclusion for people and businesses that have been prevented from obtaining credit due to high-interest rates and penalties for late payments on digital loans.

Speaking yesterday at a session where NCBA, KCB, and Safaricom jointly announced a 50% drop in interest rates imposed on the Fuliza overdraft facility, Ruto said the action was a start in the right direction, but more needs to be done to further lower the cost of loans

The new restructuring will now see customers transacting on Fuliza access the overdraft facility at a free daily maintenance fee for the first three days for transactions of KES. 1,000 and below. 

The move benefits more than 80% of M-Pesa customers who seek to complete their payment transactions with Fuliza credit.

Customers that borrow above KES 1,000 will also enjoy a 10 – 20% discount on their Daily Maintenance Fee. 

The one-off Access fee, levied when customers access Fuliza remains unchanged at 1%, establishing Fuliza as the most accessible and affordable credit facility in the country. 

The new discounted rates will be effective on October 1, 2022. 

A short-term product called the Fuliza overdraft facility was introduced in 2019 to let consumers complete mobile money transactions in the event that they ran out of money.

Customers have been criticizing the facility’s excessive interest rates on loans, a subject that was heavily discussed in the run-up to the August General Election.

At the time, Ruto, who was the Deputy President, claimed that over four million Kenyans had been turned down for official loans as a result of being placed on a blacklist by credit reference bureaus (CRBs) due to loan default.

Safaricom chief executive Peter Ndegwa said the company had lowered its rates on Fuliza by 50 percent.

“All customers will enjoy Fuliza free of the daily maintenance fee for transactions below Sh1,000,” Ndegwa said. “They will be exempt from paying the daily maintenance fee for the first three days”.

John Gachora, Group Managing Director, NCBA said this restructure aims to reinforce the original purpose of Fuliza – a short-term overdraft facility for 4 to 7 days. 

‘’From the data that we have, it is clear that the original intent for Fuliza to be a short-term credit facility has evolved,‘’ he said.

“We are taking additional deliberate steps to provide affordable credit to Kenyans in our contribution to drive up economic activity and recovery. We will anchor this on strong partnerships with various stakeholders while deploying innovative digital capabilities to enhance financial access and inclusion,” said Paul Russo, CEO – of KCB Group.

Both the banks and Safaricom also reduced transaction costs for overdrafts exceeding Sh1,000. 

As a result, the cost of borrowing between Sh1,000 and Sh70,000 has been reduced by half. 

However, the Fuliza access fee will be maintained at the current rate across all transactions, including those worth Sh1,000 and below.

Highest Paying Jobs in Kenya; KNBS Economic survey report 2022

President Ruto noted that the measures undertaken by NCBA, KCB, and Safaricom will remove between four and five million Kenyans from the Credit Reference Bureau (CRB) list, even as he assured the CRBs that the government was not against them but wanted their operations streamlined.

He also revealed that the government will engage the private sector to develop a Micro, Small, and Medium Enterprises (MSMEs) product that will enable the common mwananchi, including boda boda riders and mama mboga to access credit/ low-cost loans at single-digit rates, with the government acting as guarantor.

“I am willing to work with you in a Public Private Partnership arrangement to mitigate some of the risks that come with lending to that category of Kenyans. We are ready to commit public resources to underwrite some of the risks so that chamas, co-ops, and Saccos can access credit at single-digit interest rates,” he said.

Also read,

Ruto to utilize Safaricom’s Fuliza to disburse Hustler Fund

Large African economies dominate dollar billionaire list but not a single Kenyan

Four million Kenyans to be removed from the CRB after Ruto’s directive

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