Ruto's Bottom-Up Economics: Kenya's Bold Gamble on the Informal Sector Pays Dividends

When William Ruto campaigned for the Kenyan presidency in 2022, his message was deliberately disruptive. While his opponents spoke of macroeconomic stabilisation, infrastructure development, and foreign investment, Ruto promised something different: a "bottom-up" economic transformation that would prioritise the millions of Kenyans working in the informal sector, the smallholder farmers eking out a living on fragmented plots, and the micro-entrepreneurs who make up the backbone of the economy but had long been invisible to policymakers.

Critics dismissed the platform as populist posturing. Economists questioned whether directing resources to the informal sector — which accounts for approximately 83 percent of employment but only 35 percent of GDP — was the most efficient use of public funds. The International Monetary Fund, in its 2023 Article IV consultation, cautioned that "targeted transfers to the informal sector must be carefully designed to avoid fiscal slippage."

Two years into Ruto's presidency, the early results are in, and they have surprised many observers. The Hustler Fund, the centrepiece of the bottom-up agenda, has disbursed approximately 58 billion shillings to over 18 million borrowers since its launch in December 2022. The affordable housing programme has delivered 25,000 units, with another 80,000 under construction across 15 counties. And the agricultural sector, buoyed by subsidised fertiliser and improved market access, grew by 5.2 percent in 2025 — the strongest performance in a decade.

"We were told that bottom-up was a fantasy," Ruto said during a town hall meeting in Nakuru in March. "But the numbers speak for themselves. We are building an economy that works for the mother selling vegetables by the roadside, not just for the businessman in Nairobi's Westlands."

The Hustler Fund at Scale

The Hustler Fund, administered through mobile money platforms in partnership with Safaricom's M-Pesa, Airtel Money, and Telkom Kenya, provides micro-loans ranging from 500 to 50,000 shillings to Kenyan citizens at an annual interest rate of 8 percent — significantly below the market rates charged by commercial lenders and mobile money providers.

As of April 2026, the fund has processed over 42 million loan applications, with an approval rate of approximately 43 percent. The average loan size is 3,200 shillings, and the repayment rate stands at approximately 82 percent — a figure that has steadily improved as the fund's credit scoring algorithms have been refined. Default rates, initially a concern at 28 percent in the first quarter of operation, have declined to 18 percent as the fund introduced graduated access, where borrowers who maintain good repayment records can access larger loan amounts.

An independent impact assessment commissioned by the World Bank and published in February 2026 found that Hustler Fund borrowers experienced a 12 percent increase in monthly income on average, compared to a control group of non-borrowers. The most significant income gains were recorded among women borrowers (15 percent) and rural borrowers (14 percent), suggesting that the fund is reaching the populations it was designed to serve.

"The Hustler Fund has done something remarkable: it has brought formal credit to people who were previously invisible to the financial system," said Dr. Nancy Laibuni, a development economist at the University of Nairobi. "The question now is whether these gains can be sustained and scaled."

Tax Reforms and Revenue Collection

The bottom-up agenda has required a parallel effort on the revenue side. Kenya's tax-to-GDP ratio, long below the sub-Saharan African average of 17 percent, stood at approximately 14.2 percent when Ruto took office. The administration has pushed for an ambitious target of 18 percent by 2027, implementing a series of tax reforms that have been both praised for their ambition and criticised for their social impact.

The Finance Act of 2024 introduced a housing levy of 1.5 percent on employee gross salary, matched by a 1.5 percent employer contribution, to fund the affordable housing programme. The levy, which took effect in January 2025, has generated approximately 38 billion shillings in its first year, though it has faced legal challenges from the Central Organisation of Trade Unions and a section of civil society groups who argue that it is an additional burden on already strained workers.

The Kenya Revenue Authority, under Commissioner General Humphrey Wattanga, has invested heavily in digital tax administration, deploying artificial intelligence-based systems to identify tax evasion and improve compliance. Revenue collections increased by 19 percent in the fiscal year ending June 2025, reaching approximately 2.8 trillion shillings — the strongest growth in a decade.

The government's approach to the informal sector taxation, however, has been more nuanced. Rather than imposing new taxes on micro-enterprises, the KRA has focused on simplifying compliance and creating incentives for formalisation. The turnover tax, which applies a flat rate of 3 percent on businesses with annual revenues below 5 million shillings, has enrolled approximately 420,000 informal businesses since its expansion in 2025.

Agricultural Transformation

Agriculture, which employs approximately 70 percent of Kenya's rural population and contributes approximately 22 percent of GDP, has been a priority sector for the bottom-up agenda. The government's fertiliser subsidy programme, which reduced the cost of a 50-kilogramme bag of fertiliser from approximately 6,500 shillings to 2,500 shillings, has been one of the most popular interventions.

In the 2025 long rains season, the programme distributed approximately 6 million bags of subsidised fertiliser through the National Cereals and Produce Board and the e-voucher system, reaching an estimated 2.5 million farmers. Maize production increased by 18 percent to approximately 44 million bags, narrowing the national food deficit to approximately 3 million bags.

The government has also invested in agricultural value addition, supporting the construction of 15 new agro-processing facilities across the country. A fruit processing plant in Makueni County, built with a public-private investment of 1.2 billion shillings, is now processing 50,000 metric tonnes of mangoes and passion fruit annually, providing a market for approximately 8,000 smallholder farmers.

Challenges and Criticisms

Despite the progress, Ruto's bottom-up model faces significant challenges. The fiscal mathematics remain daunting: the combination of increased spending on social programmes and tax cuts for low-income earners has widened the budget deficit, which stood at 7.8 percent of GDP in the fiscal year ending June 2025 — above the government's own target of 5.4 percent.

Public debt, which crossed the 10 trillion shilling threshold in 2025, remains a concern. Debt servicing costs consume approximately 65 percent of government revenue, leaving limited fiscal space for development spending. The Eurobond maturity in June 2024, which the government refinanced through a new $2 billion issuance, highlighted the vulnerability of Kenya's debt position to global financial conditions.

The political opposition, led by Raila Odinga's Azimio coalition, has continued to criticise the government's economic management, arguing that the bottom-up agenda has been undermined by corruption and implementation failures. The anti-government protests that rocked Nairobi and other cities in mid-2025, while partly political in motivation, also reflected public frustration with the cost of living.

Inflation, which peaked at 9.6 percent in October 2024, has moderated to 5.3 percent as of March 2026, but food prices remain elevated, particularly for maize flour, milk, and cooking oil — staples of the Kenyan diet.

The Verdict

The bottom-up economic model is still a work in progress, and its long-term success will depend on the government's ability to balance social investment with fiscal discipline, combat corruption, and maintain the political will to sustain reforms over multiple electoral cycles.

Yet the early results are undeniable. The Hustler Fund has brought credit to millions who were excluded from the formal financial system. The affordable housing programme is creating jobs and assets. And the agricultural subsidies, while fiscally costly, have demonstrably increased food production and farmer incomes.

Ruto's gamble was that investing in the bottom of the economy would generate growth from the bottom up. Two years in, the evidence suggests that the gamble — while risky and imperfect — is beginning to pay off.