Last Fri­day, the Kenya Nation­al Bureau of Sta­tis­tics (KNBS) announced that infla­tion hit 9.2 per cent in Sep­tem­ber, the high­est rate in 63 months. This result­ed from a stub­born­ly high cost of liv­ing. Between August and Sep­tem­ber, maize flour prices rose by 8.4 per cent even as pow­er prices went up by 20.9 per cent. Fur­ther to this, petrol prices shot up by near­ly 20 per­cent, in the process hik­ing trans­porta­tion costs by a stag­ger­ing 25 per cent.

It is there­fore grat­i­fy­ing to see the Ruto admin­is­tra­tion tak­ing firm baby steps for­ward. But although the new admin­is­tra­tion is still in its infan­cy, the Pres­i­dent has already pro­nounced him­self bold­ly on the mat­ter of small busi­ness­es. He is spot-on.  After all, SMEs cre­ate 80 per­cent of employ­ment in Kenya. Dur­ing his speech to the joint ses­sion of par­lia­ment last Thurs­day, the Pres­i­dent said that his gov­ern­ment would allo­cate Ksh50 bil­lion every year to the Hus­tlers Fund for MSMEs.

There is no doubt that the Hus­tlers Fund, if well exe­cut­ed, can pro­vide much need­ed afford­able cred­it for small busi­ness­es. Cur­rent­ly, such cred­it is vir­tu­al­ly impos­si­ble to come across. The Youth Enter­prise Devel­op­ment Fund pro­vides a busi­ness loan prod­uct that attracts a sin­gle-dig­it inter­est of 6%. But there is a catch – the loan can only be secured through con­ven­tion­al secu­ri­ty, which is a chal­lenge for many youth.

Banks are worse. Some of the cheap­est loan rates in the bank­ing sec­tor are at 13% inter­est rate. This effec­tive­ly knocks out many small busi­ness­es as they sim­ply can’t afford to ser­vice such high-inter­est loans. To make mat­ters worse for them, last Thurs­day the Cen­tral Bank of Kenya (CBK) raised the key lend­ing rate from 7.50 per­cent to 8.25 per­cent. This will like­ly lead to high­er-inter­est bank loans, fur­ther mar­gin­al­iz­ing small businesses.

In the devel­oped coun­tries, afford­able cred­it is often the norm, not the excep­tion. Back in 2013, Britain’s Sains­bury’s Bank launched a per­son­al loan rate of a mere 4.8% for three years. Despite this low rate, cus­tomers were allowed to bor­row up to Sh2 mil­lion! It would be amaz­ing for small busi­ness­es in Kenya, wouldn’t it?

The Hus­tlers fund seems intend­ed to fill a gap that is cur­rent­ly not met by exist­ing finan­cial insti­tu­tions but to ensure its suc­cess, trans­paren­cy and account­abil­i­ty must be the norm. We must also be inten­tion­al in train­ing to erad­i­cate the cul­ture of enti­tle­ment of free money.

Direct part­ner­ships between The Gov­ern­ment and renown man­u­fac­tur­ers of tools of busi­ness that Kenyans reg­u­lar­ly bor­row to buy, may pro­vide one of the pos­si­ble fool-proof mea­sures in Hus­tler Funds loan dis­burse­ments. In this bar­gain, the Gov­ern­ment in a well thought out arrange­ment that involves umbrel­la asso­ci­a­tions would direct­ly pay man­u­fac­tur­ers of pop­u­lar prod­ucts like motor­bikes, posho mills, tillers and water pumps. Using exist­ing sys­tems of recov­ery to reduce risk of default, the man­u­fac­tur­ers would then sup­ply the prod­ucts of choice to Hus­tler Fund loa­nees. Both par­ties will get val­ue for mon­ey. In addi­tion, local man­u­fac­tur­ing will be boost­ed, which will cre­ate more jobs for Kenyans. Fur­ther, this arrange­ment would save the fund from the high default rate that have plagued pre­vi­ous such funds.

In most busi­ness­es, it takes time for a Return on Invest­ment (ROI) to be real­ized. It is there­fore unre­al­is­tic to expect that small busi­ness­es will with­in weeks break even and afford pay­ing back loans, how­ev­er low the inter­est may be. The Hus­tler Fund there­fore, ought to pro­vide suf­fi­cient grace peri­od before the loan repay­ment com­mences. Fur­ther to this and per­haps even more impor­tant, the Gov­ern­ment should con­sid­er enrolling select small busi­ness own­ers into busi­ness incu­ba­tion pro­grams. This is what green mon­ey entails – it tack­les the big­ger pic­ture in a sus­tain­able man­ner. Think green, act green!