Cash injection to save student loans scheme

Kenya’s government has moved to quell a financial crisis facing its student loans body with a plan to pump US$5.8 million into the fund. The additional money is expected to give the Higher Education Loans Board, HELB, a ‘war chest’ to finance thousands of new students.

The extra students are coming in between this month and the end of March under the double-intake plan, a gradual strategy that should see universities enrol 40,000 students over and above their usual intakes in the next three years.

But the US$5.8 million (KSh500 million) is only a third of the U$17.7 million (KSh1.5 billion) HELB needs if it is to fund the new students adequately.

Finance Minister Uhuru Kenyatta told reporters last week that the extra funding would come in through a supplementary budget, which is being prepared to be passed by parliament at the end of March.

HELB has been seeking treasury intervention for months now and the commitment by the finance minister is being read as a resolve to end the crisis at the loans body.

In the current fiscal year, HELB has received US$28.2 million, up from the US$18.8 million it received two years ago. But the increment has not kept pace with the 40% rise in enrolments during the period, especially as HELB has had to increase the ration it gives to each student to factor in inflation, which has shot up by nearly 20%.

The loans board gives the equivalent of at least US$650 per needy student annually towards fees and boarding expenses.

The rising demand for loans and surging cost of living has sent the agency into a financial crunch, faced with a dwindling pool of funds. This has meant that needy students are missing out on opportunities for loans in a country where higher education is increasingly becoming difficult for households to afford.

University education in Kenya, a 2009 World Bank report showed, is among the most expensive in the region. With over 50% of Kenyan households considered poor according to government statistics, most parents and guardians require supplementary funding to keep their children in class.

It is estimated that 60% of a household’s budget in Kenya goes into spending on education, with university studies taking the biggest chunk of this since primary education is free for all and secondary education is partly subsidised.

HELB has been mulling over a range of fundraising options to allow it to keep up with growing demand and to stave off overreliance on faltering state funding.

As previously reported, earlier this month HELB announced that it had entered into a financing deal with the French Agency for International Development and was eying borrowing instruments in the World Bank and the African Development Bank.

Through the deal, the development agencies are expected to offer students subsidised loans, at pre-determined rates estimated at slightly above the current 4% at which HELB lends to undergraduates, to be disbursed through local commercial banks.

Educationists have been calling on the government to structure a financing plan to roll out this programme, with money being pumped into enhancing the student loans fund, building new infrastructure and hiring more teachers.

Failure to do this, they reckon, would hurt the quality of learning.