No Collateral For 'Hustler' Loans, No CRB Listing - Money Weekly

In this week’s edition of money weekly, we take a look at what has been happening in the "hustler’s" arena, with the Hustler Fund taking centerstage, Kenyans’ borrowing spree, the banking sector, as well as other significant money news from the past seven days.

No Collateral Required For 'Hustler' Loans

Kenyans who apply for loans through the Hustler Fund or Financial Inclusion Fund will not be required to provide collateral.

Simultaneously, as the government moves to enforce credit scores as a sign of a borrower's creditworthiness, defaulted borrowers on Fund facilities will not be negatively listed with Credit Reference Bureaus (CRBs).

The National Treasury disclosed the information at the conclusion of Wednesday's public participation sessions for the fund's regulations.

“We are moving away from the CRBs and collaterals and we will be basing disbursements on the character of borrowers. The more we can formalise the customers' behaviour the more we can graduate them to higher loan limits,” Samuel Keria, a member of the task force reviewing the regulations told stakeholders.

According to the disclosure, loans from the Financial Inclusion Fund will mostly resemble those disbursed through digital/mobile apps, where a borrower is restricted to a lower scale of funds before qualifying for greater loan values.

In addition to this, Treasury has revealed that the initial wave of disbursements, which would cover loan values ranging from Ksh500 to Ksh50,000, will be targeted to people all over the country, with Saccos, chamas, and businesses eligible for larger loans in the following phases.

Read Also: How to Apply for the Hustler Fund Loan

CBK Directs Banks to Forego Ksh15Bn Digital Loans

At least 4.2 million Kenyans who did not repay Ksh30 billion borrowed digitally from banks, microfinance and mortgage finance providers have been given relief after the Central Bank of Kenya (CBK) worked out a framework to cut the load in half.

The CBK stated on Monday that the credit repair framework, which will be implemented by commercial and microfinance banks, as well as home finance companies, will see lenders relinquish at least Ksh15 billion in borrowers' debts by discounting loans by 50%.

“Through the framework, the institutions will provide a discount of at least 50% of the non-performing digital loans outstanding as at end of October 2022, and update the borrowers' credit standing from non-performing to performing.

"The institution will then enter into a repayment plan with the borrowers for a period of up to May 31, 2023, for the balance of the loan. Upon expiry of the framework, the credit standing of the borrowers with respect to these loans will depend on their repayment performance during the six-month period,” the CBK stated.

According to the CBK, the Framework's goal is to enhance the creditworthiness of mobile phone digital borrowers who have been reported to Credit Reference Bureaus (CRBs) for failing to service loans taken via mobile phones.

It applies to all loans with payback terms of 30 days or less that were categorised as non-performing by the end of October 2022 but not those offered by app-based digital lenders.

The framework will expire on May 31, 2023, and lenders have been encouraged to contact borrowers and give them additional information on the framework.

>>>> Compare Kenya’s Top Personal Loans

Kenyans Borrow Ksh1.8Bn on Fuliza Every Day

In the six months to September 2022, at least Ks316 billion was borrowed through Safaricom's overdraft facility, Fuliza, amounting to Ksh1.8 billion every day. This is a 30% increase from Ksh242.6 billion borrowed in the same period last year.

Last year, the daily distribution was Ksh1.3 billion.

At least 60% of the loan was for consumption, indicating that many families are in survival mode amid skyrocketing inflation, which reached 9.6% in October.

Read Also: What is Consumer Debt, and Why is it Considered Bad?

This is proven by the fall in the size of Fuliza tickets, which has decreased by ksh50 in the last year.

In the review period, the average amount borrowed on the platform was Ksh320.90, compared to Ksh375.80 in the same time the previous year.

According to data from Safaricom Plc's half-year results for the period spanning March and September, a total of 7.4 million Kenyans borrowed from Safaricom's famous overdraft facility, the highest number of consumers on record.

The number of distinct subscribers on the service increased by 14.2% from 6.4 million in the same period the previous year, according to the telco.

Disbursements on Fuliza are expected to increase even further following a 50% drop in the pricing of the overdraft facility for transactions up to Ksh1,000 for the first three days.

Fuel Prices Fall By Ksh1

The Energy and Petroleum Regulatory Authority (EPRA) announced a reduction in super petrol, diesel, and kerosene pump prices by Ksh1, Ksh2, and Ksh1 per litre, respectively.

As a result, a litre of super fuel in Nairobi now costs Ksh178.30, diesel Ksh163, and kerosene Ksh146.94.

The average landed cost of imported Super Petrol fell 10.60% from USD$812.91 per cubic metre in August 2022 to USD$726.77 per cubic metre in September 2022.  

Diesel fell 6.87% from USD$949.68 per cubic metre to USD$884.46 per cubic metre, and kerosene fell 1.82% from USD$899.56 per cubic metre to USD$883.22 per cubic metre.

To cushion consumers from the otherwise high prices, a subsidy of Ksh18.15 and Ksh27.47 per litre has been maintained for Diesel and Kerosene, respectively.

Read Also: Nairobi Transport Agony: Most Affordable Ways to Commute

Kenyans to Get Faster, Safer Internet

Kenya's internet connectivity has received a boost, allowing users to access online services more quickly and be more protected from cyberattacks.

This comes after the Internet Corporation for Assigned Names and Numbers (ICANN) launched a new Managed Root Server (MRS) cluster in Nairobi.

The cluster contributes to the improvement of Domain Name System(DNS) infrastructure in any country, territory, or region around the world.

It is critical for increasing Internet access and maintaining Internet stability. Additionally, the cluster will mitigate the impact of possible cyberattacks across Africa.

Distributed denial-of-service attacks, which work by flooding servers with queries or Internet traffic, are one of the most popular types of attacks.

MRS clusters reduce traffic by increasing bandwidth and data processing capacity. It also ensures that Internet searches can be answered locally, reducing reliance on networks and servers in distant areas of the world.

The installation of the new cluster, according to ICT Cabinet Secretary Eliud Owalo, is in keeping with the government's objective to digitise the nation.

Read Also: 7 Ways Identity Theft Can Happen to You and What to Do

Other Money News

• The Central Bank of Kenya (CBK) has asked banks to reduce their reliance on CRB listings when making lending decisions. This is part of ongoing credit information sharing framework (CIS) reforms aimed at enhancing loan disbursements to small and medium-sized businesses (SMEs). Simultaneously, the CBK has instructed Credit Reference Bureaus (CRBs) to include a disclaimer on credit reports stating that the credit score shown must not be the only consideration utilised in credit approval.

• The Mombasa Port has recorded a rise in used-car imports as commercial dealers and individuals scramble to meet the December 31 deadline for 2015 manufactured cars. This is due to the eight-year restriction, which prohibits older vehicles from being imported into the nation. Between Wednesday and Friday last week, a total of 2,691 units were offloaded at the port.

• Following the Central Bank of Kenya (CBK) raising the benchmark for interest rates on September 29, 2022, various commercial banks in Kenya have increased their lending rates by up to 1.1 percentage points, effective at the end of November 2022. From the rates reviewed by Money254, the highest lending rate is 15.7% and the lowest lending rate is 7.02%. Nonetheless, other commercial banks have chosen to keep old interest rates in what could be an effort to increase the competitiveness of their products.

REVEALED: Banks to Increase Interest Rates Starting December (Full List)