Student loans body threatens to name and shame defaulters

Kenya’s Higher Education Loans Board (HELB) has vowed to publish the names and pictures of up to 85,000 former university students, dating back to 1975, who have defaulted on their loan repayment.

In a statement released by HELB on 19 November, the loan’s body gave defaulters 30 days to explain to the body how they will repay the loan. Failure to do so would result in the publication of their names and photographs in leading newspapers. Thereafter, legal action may ensue.

“HELB wishes to notify the general public and loan defaulters that the HELB student loan is a government debt which should be repaid as per the terms and conditions on which it was advanced,” read the statement.

Hindering current funding of students

It said the funds received from loan repayment are used to support needy students, “therefore sustained default hinders funding of other deserving Kenyan youth”.

HELB is mandated to provide loans, bursaries and scholarships to Kenyan students pursuing higher education in recognised higher education institutions and to recover loans from the beneficiaries.

It is estimated that HELB is owed almost KES50 billion (approximately US$500 million) by former university students and cannot trace 17,000 of its loan defaulters.

Charles Ringera, HELB chief executive officer, said the HELB Act of 2012 gives the board the mandate and authority to pursue loan recovery and HELB will partner with law enforcement agencies to track down loan defaulters and compel them to pay.

Kenya's Credit Reference Bureau blacklists all defaulters which makes them unable to borrow any money from commercial banks or Savings and Credit Co-Operatives.

In contravention of the act?

Kennedy Kimani, an education researcher in Nairobi, told University World News it would be in contravention of the Higher Education Loans Act for HELB to publicly shame the loan defaulters. He said the board should instead establish the reason why each person has defaulted before taking action.

“The law does not contemplate such a situation of shaming and embarrassing them,” he said, adding that in cases where defaulters are employed, the employer is also instructed to remit repayments directly to HELB.

He said the act also gives the option of loan waiver in consideration of those defaulters who are either suffering financial hardship or who are unemployed and where it is impossible to recover the loan.

Kimani said HELB should now consider other ways of sourcing funds instead of relying on the government budget and on the loan repayment.

HELB charges a levy of US$50 to all beneficiaries one year after leaving university, regardless of whether they are employed or not.

The act stipulates that a beneficiary should begin repaying his or her loan within one year of completing their studies. Anyone who fails to do so will be required to pay a fine of US$50 in respect of each loan deduction that remains unpaid.

Over the past five years HELB has sought several avenues to reduce the level of non-performing loans which have crippled its growth ambitions, with its financier, the government of Kenya, cutting its disbursements in the wake of surging demand for loans.

Successful recovery

Last year, HELB recovered more than US$5 million following a two-month amnesty issued by the government.

Due to the high unemployment and migration of beneficiaries to the diaspora seeking greener pastures, the number of defaulting borrowers has continued to increase, with a default rate of over 30%, nearly three times the national financial sector percentage of non-performing loans which stands at around 12%.

Since the beginning of last year it has become mandatory for all graduates to seek clearance from the loan agency before they can secure a job, as part of efforts to curb loan defaulting.

Working with the government, HELB said it is tightening the noose on Kenyans living in the diaspora who are not repaying their loans and is seeking to sign appropriate memoranda of understanding with governments across the globe to boost recoveries.

As a result of the interventions, a total of US$490 million was recovered last year compared to US$400 million in the previous year.