The Hustler Fund management has irregularly let nearly 400,000 loan defaulters off the hook, a move that Auditor-General Nancy Gathungu says could see Sh377.5 million go up in smoke at the taxpayer’s expense.

In her report on the Financial Inclusion Fund, popularly known as the Hustler Fund, for the financial year ending June, 2025, Ms Gathungu reports that loan accounts for 386,735 borrowers were suddenly closed, before they could repay.

The closures, Ms Gathungu says in the report, were done irregularly and without explanation.

The loan accounts in question were opened through Safaricom sim cards, and auditors found that they had been marked as closed “despite the principal amounts not having been fully repaid.”

Also Read: Government to blacklist Hustler Fund defaulters from accessing credit

“The outstanding principal on these accounts amounted to Sh377,490,360, which should have been recovered before account closure. Management did not provide any evidence to justify or support the closure of these accounts,” Ms Gathungu stated in a report released late last Month.

Hustler Fund Chief Executive Officer (CEO) Henry Tanui did not respond to questions seeking an explanation on the circumstances under which the loan accounts were closed despite the huge balances and considerations the Fund takes into account before closing a loan account.

The Nation first sent questions to Mr Tanui on March 25, 2026, and has since sent multiple reminders through phone calls and text messages to his known mobile phone number.

In one instance, the CEO suggested that documents available at Hustler Fund offices have no such details.

The closure of loan accounts before repayment of loans contravenes the law requiring the fund to seek full repayment of loans it issues.

Regulation 23 of the Public Finance Management (Financial Inclusion Fund) Regulations, 2022 requires that “a financial product or service advanced under these Regulations shall be repaid in full within the period determined in the agreement, and that all sums due to the Fund are recoverable as a debt owed to the Fund.”

Also Read: Hustler Fund riddled with flaws, says Kenya Human Rights Commission

The audit report was tabled before the National Assembly in March.

Besides the illegal closure of loan accounts, Ms Gathungu has also faulted the Fund for issuing additional loans to some 11,550 borrowers before they could repay their initial loans.

The Fund is reported to have issued 26,117 loans to the borrowers, exposing weaknesses in its credit control and loan-limit enforcement.

“However, Management does not have a credit policy and collection strategy for non-performing loans. In the circumstances, the effectiveness of internal controls on management and recovery of the outstanding loans could not be confirmed,” the public auditor said.

Auditor-General Nancy Gathungu.

Photo credit: Dennis Onsongo | Nation Media Group

The government has, since the establishment of the Hustler Fund, pumped in Sh14.8 billion out of the more than Sh80 billion loaned through the Fund so far.

The Sh14 billion forms part of the loans issued through the Fund, as partner banks and payment service providers chip in with additional cash.

By last month, the State Department for Micro, Small and Medium Enterprises (MSME) informed Parliament that out of the Sh83 billion loans issued through Hustler Fund, Sh71 billion had been repaid.

The state department was seeking a Sh300 million allocation by MPs to facilitate chasing some Sh12.5 billion in loan defaults.

Also Read: Questions MPs want answered as recoverability of Sh12.6bn Hustler Fund in doubt

The public auditor also says that the Fund has not set loan limits for some 4.27 million customers, risking the possibility of them being loaned more than they can afford to pay back. The Fund had about 26 million borrowers by end of last year.

During the year under review, Kenyans borrowed Sh17.9 billion from the Hustler Fund, indicating the traction it has gained among mostly people of low means.

“However, 104,631 loans amounting to Sh116,465,155 were disbursed to customers whose National Identity Cards numbers were not captured in the customers' database,” Ms Gathungu queried.

“In the circumstances, the issuance of loans to customers without established loan limits points to inadequate credit assessment controls and increases the risk of lending to unqualified or unverified customers,” she added.

The Hustler Fund is one of President William Ruto’s pet projects introduced to ease access of credit, particularly among the youth and persons in the informal sector.

President William Ruto delivers his speech during first anniversary celebrations of Hustler Fund in Nairobi.

Photo credit: File | PCS

In a previous interview, MSME Principal Secretary (PS) Susan Mang’eni said many Kenyans preferred borrowing from the Fund due to the assurance that they don’t run a risk of debt-shaming, as had been the case with digital lenders.

“It has brought about dignity. It is making Kenyans also look like people. Where we make financial decisions that most of the time are against our dignity. It has really helped us,” Ms Mang’eni said.

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pmburu@ke.nationmedia.com