Hustler Fund and Credit Guarantees: How Ruto’s Govt Plans to Unlock Affordable Loans for MSMEs

Kenya’s Treasury is preparing a massive eightfold expansion of its Credit Guarantee Scheme, scaling the fund from Ksh3 billion to over Ksh25 billion in a bold push to unlock financing for thousands of struggling small businesses.

The ambitious expansion targets unlocking up to Ksh50 billion in commercial bank lending for micro, small and medium enterprises (MSMEs) that banks typically reject or charge prohibitive interest rates due to perceived risks.

According to the Treasury’s draft 2025 Budget Policy Statement, this strategic intervention will transform access to capital for businesses that possess strong ideas but lack the traditional collateral banks demand.

“Complementing this, the Credit Guarantee Programme will be expanded to facilitate Sh50 billion in commercial bank lending to over 200,000 enterprises. By providing partial risk guarantees to financial institutions, the programme unlocks bank credit for MSMEs that possess viable business ideas but lack traditional collateral,” the statement reads.

The State-backed programme fundamentally changes the lending equation by absorbing a portion of default risk, encouraging banks to extend credit to businesses they would normally sideline or penalize with exorbitant rates.

This government initiative will work alongside a forthcoming private-sector credit guarantee scheme currently in development, creating multiple pathways for small business financing.

Since launching in December 2020, however, the Credit Guarantee Scheme has experienced disappointingly slow uptake, with cumulative disbursements reaching just Ksh6.2 billion, far below its potential impact.

The scheme operates by having the government guarantee part of each loan’s value, enabling banks to extend credit on more favorable terms than standard market rates would allow.

President William Ruto’s administration, which campaigned on uplifting Kenyans at the bottom of the economic pyramid, is aggressively expanding affordable credit access through both the Credit Guarantee Scheme and the popular Hustler Fund.

Launched in November 2022, the Hustler Fund functions as a digital lending platform delivering affordable, short-term loans to micro, small and informal businesses, plus individuals locked out of traditional banking services.

Treasury officials reveal plans to scale the Hustler Fund to disburse Ksh100 billion across 30 million Kenyans, including informal sector workers, small traders and entrepreneurs “who have historically been excluded from formal financial services.”

The expansion aligns with Central Bank of Kenya initiatives, which has released draft regulations establishing the legal framework for independent credit guarantee companies.

Under the proposed regulations, these firms will absorb losses on specified portions of banks’ loan portfolios while charging fees for providing loan insurance coverage.

The draft framework mandates that credit guarantee companies raise minimum capital of Ksh1 billion and maintain capital adequacy ratios matching those required of commercial banks, ensuring financial stability and credibility.

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