BOTSWANA: Review of loan scheme underway

Nearly 100,000 students have been sponsored through Botswana's controversial grant/loan scheme. But a review has found that fewer than one in 10 studied in areas of critical skills shortages, a high proportion of beneficiaries were unaware of what they owed, and it was not known how much had been loaned but could have been close to US$1 billion. The review suggested alternative models for a new scheme.

In early 2009, Botswana's Ministry of Education and Skills Development began a review of the grant/loan scheme (GLS), which was 15 years old but had never been evaluated.

Normally, work by consultants is not made public until long after it is completed and approved by government - and if rejected the report might never reach the public eye. But last month a stakeholder meeting was held to discuss the GLS review.

The one-day workshop was called by the Department of Tertiary Education Financing through the Ministry of Education and Skills Development. Some 140 people from key sectors attended, including from ministries, politicians, employers, tertiary institutions and the press.

The stakeholders were sent in advance publications produced by the consultants, Evaluation Services Team Botswana (BEST). The documents totalled 175 pages but lacked an executive summary and a clear set of recommendations.

The ministry wanted the stakeholders to debate the efficacy of the GLS, and in six smaller workshops explore the relevance of four alternative models proposed by the consultants as well as the need for an improved IT system and a legal framework.

The workshop made headlines, with the most detailed reporting in the private daily, Mmegi/The Reporter.

The GLS places tertiary students sponsored by the Ministry of Education into five categories intended to help channel students into careers where human resources were in short supply - priority areas.

Most of these fields require a solid base in science and mathematics, the foundation of what in Botswana are 'scarce skills'. These are the two subjects that students in their first 12 years of education tend to do poorly in or fail.

Even if more had passed at O level, there was a blockage at the next level as the University of Botswana had limited places in its science foundation year (required for medicine, engineering and other science-based subjects).

The ministry partially got around this by sponsoring, at great cost, high-flyers to study in South Africa, Malaysia, Australia, New Zealand, Canada, the US or UK. Some students did not return to work in Botswana, creating a new problem of 'brain drain' - and a shift for these students from 100% sponsorship to a loan that should be repaid.

Category 1 covered the sciences, medicine and engineering among other disciplines, and offered a 100% grant. Category 2 included subjects such as economics, town planning and agricultural science and attracted a 100% grant on tuition and a 50% loan on maintenance.

Category 3 included subjects such as law, journalism, social work and psychology and entailed a 100% grant on tuition and a 100% loan on maintenance. Category 4 covered fields of lower priority such as sociology, philosophy and physical education and had a 50% loan on tuition and 100% loan on maintenance.

Category 5 covered 'marginal' careers such as cosmetology, photography and performing arts and carried 100% loans for both tuition and maintenance.

The review found that though nearly 100,000 tertiary students had been sponsored by 2008, only 8.7% were in Category 1; 55.1% in Category 2; 27.5% in Category 3; 8.3% in Category 4; and 0.4% in Category 5.

It was found that the categories had never worked properly. Small sample surveys revealed a significant proportion of beneficiaries were not aware of what category they were in, nor what they owed, if anything.

It was not known how much had been loaned but it could have been up to six billion pula (US$870 million). By 2009, only 40 million pula had been recovered. The consequence of this failure to recover was that all loans ended up being perceived by the beneficiaries as 'grants', even though they had signed agreements stipulating the conditions of their sponsorship.

It was revealed that the GLS had been operating from the beginning without an Act of Parliament to empower its activities, particularly debt recovery. Students were placed in tertiary institutions around the world and their bills paid but recovery was missing, except for some who were employed in the public service.

The Department of Student Placement and Welfare failed to develop an adequate IT or data system using one persistent identifier for each beneficiary and a system not dependent on manual processing and manual records. Many other problems were identified by the review.

Strikingly, some of the beneficiaries who came forward to begin to pay off their loans were told that the department was unable to tell them how much they owed.

BEST carried out comparative studies in a number of countries, particularly those where a relatively successful scheme was in place. BEST personnel visited Australia, Ghana, The Netherlands, Sweden and South Africa. The literature review revealed that those African countries that implemented tertiary loan schemes had a poor record of cost recovery.

A study earlier this year by Hua Shen in China and Adrian Ziderman in Israel looked at 44 loans schemes in 39 countries out of 70 they found around the world. Their analysis showed considerable variation in repayment and recovery ratios across schemes. Also, many loan schemes exhibited sizeable built-in subsidies accruing to student borrowers - in more than 40% of the schemes, the repayment ratio was 40% or less. Loans recovery was considerably lower.

The consultants were impressed by the Higher Education Contribution Scheme/Higher Education Loan Programme in Australia, now in its 21st year, and the National Student Financial Aid Scheme in South Africa, set up by a parliamentary Act in 1999.

Both employ a unique identifier, provide income-contingent loans with indexed thresholds, have found ways to encourage disadvantaged students to pursue higher education, provide incentives if loans are paid back up-front or expeditiously, have found ways to encourage students to consider professions where there are human resource shortages, and require universities to counsel students through student services and on-campus financial aid offices.

IT support is comprehensive and beneficiaries can find out on the web at any time how much they have borrowed and how much they still owe. The countries believe they have created loan repayment programmes that are fair and that beneficiaries can cope with. Loan repayments go into a trust fund, not general revenue, so that the university sector can benefit further in future.

The workshop in Gaborone considered four possible models but failed to rank them in any order of priority although the consultants had ranked them. According to Mmegi, "The team revealed that their preferred option is the one that has principles of cost sharing, cost recovery and equity considerations well balanced.

"The option states that parents would pay 50% of tuition fees upfront with government paying the other 50%. It states that thereafter all other costs would be borne by the beneficiary in the form of a loan from government repayable over a maximum of 15 years after completion of studies with a grace period of three months from the date of completion.

"According to the report, the loan, as is the case with the current scheme, remains interest free with a 10% discount on loan for completing studies on time," Mmegi reported.

"Beneficiaries who come forward to indicate that they cannot afford to pay the 50% tuition fees would be put through a means test to establish the portion of the fees they cannot afford to pay, if any. It states that those who cannot afford to pay anything at all would end up receiving 100% support from government on tuition fees as a grant from government but will still have to shoulder the 100% loan on all other costs.

"The researchers explained that this option includes effective cost sharing by beneficiaries right from the start, thus freeing more government funds for sponsorship of an additional number of deserving students."

The other options all embodied elements of cost sharing and cost recovery that it was felt by the consultants could be manageable, with the fourth being the most complicated as it would require a means test - already in place with the introduction of fees for secondary schools.

The team also proposed an Act of Parliament, the creation of a semi-autonomous body to administer the loans, and the involvement of the Botswana Unified Revenue Service.

They recommended that students who were sponsored to study outside Botswana to meet identified human resource requirements should be expected to pay back the equivalent of what it would have cost if they had studied within Botswana. The building of a second public university and a new medical school at the University of Botswana should help to alter this picture in the near future.