French give US$30 million credit for university growth

The French Development Agency, or AFD, has given a US$30 million concessional credit line to commercial banks in Kenya to finance new and ongoing university infrastructure investment initiatives in strategic faculties.

A memorandum of understanding signed between the Kenyan Ministry of Education, Science and Technology and the AFD shows that the grant will be available to all 39 chartered universities – 22 public and 17 private – to boost their efforts to tackle the challenges of relevance, access, equity and quality.

This follows an earlier request by the ministry to the French agency for support for higher education expansion with the involvement of commercial banks, to support university infrastructure investments that are aligned with the national strategic plan, Vision 2030, and the current and future needs of the private sector and industries in Kenya.

The loan will be subsidised and will attract an interest rate of 7%, which is significantly lower than the prevailing average interest rates of 18% that commercial banks are charging.

The AFD – a public financial institution that implements policy defined by the French government – will partner with three Kenyan commercial banks to provide the soft loans to universities.

Chase Bank, Commercial Bank of Africa and Cooperative Bank of Kenya have expressed strong interest in this AFD higher education credit line. If all the requests exceed US$30 million, AFD may consider providing a second batch of credit lines.

The areas of priority are agriculture, civil engineering, ICT, medicine and health sciences, energy resources (solar, oil and mineral), and science, technology and innovation.

Eligible projects will be infrastructure investments such as laboratories, equipment, lecture halls and hospitals.

“The purpose of the credit line is to finance new and ongoing infrastructure investment programmes to be implemented in three to four years,” said Kenya’s Cabinet Secretary for Education, Dr Fred Matiang’i.

He said Kenya needed to graduate a minimum of 1,000 doctoral degree candidates every year to be able to meet higher education and training needs.

According to the memorandum of understanding, only investment programmes targeting operational facilities leading to immediate use by students and staff will be eligible for the credit line. The amount of the investments should range between US$486,003 and US$972,006.

A steering committee will be created for the scientific and technical assessment of proposals. The committee will advertise and launch calls for proposals, assess the proposals, document the final decision and follow up until the final selection of projects by the banks.

The AFD could also directly finance the expansion projects of one or two universities if the size of the projects is sufficient to justify a direct intervention. The universities will then enter into a partnership with AFD.

AFD undertook a prospective mission to Kenya in February 2011 and financed a market survey aiming at assessing and verifying the needs for specific financing and support in order to scale up the long-term investments of universities.