Low study loan recovery could affect future beneficiaries

The Rwandan government has invested billions of francs in a student loan scheme over the past four decades, but the low recovery of loans from university graduates could mean that fewer students get loans in the future.

Beneficiaries are expected to repay loans at 8% annual interest once employed.

The loans are granted to potential students at Rwandan institutions or abroad who did well at secondary school but would otherwise not have had the means to pay for higher education themselves.

Income from loan repayments is supposed to be invested to fund the education of future beneficiaries. The responsibility for loan recovery was placed with the Development Bank of Rwanda (Banque Rwandaise de Développement, or BRD) in 2015 after the Higher Education Council (HEC), which was previously tasked with this, proved not to have the capacity to do so on its own.

Despite this intervention, an auditor general’s report found that the low level of repayment means the fund is not efficient enough to benefit the same number of students in future.

A debate on the report by parliament’s Public Accounts Committee earlier this month was attended by officials from the HEC as well as the BRD. According to the report, only 18,626 (about 13.3%) of the 139,925 former beneficiaries who are supposed to have repaid their loans had done so as of the middle of 2021.

In terms of cash, the BRD says only RWF24.4 billion (about US$23.6 million) out of the total disbursement of RWF221.85 billion has been recovered. This number includes disabled or deceased former beneficiaries whose loans were either waived or written off.

The administration of the scheme is further marred by a lack of accurate data on students who have benefited over the years.

Also, despite a law requiring employers to report to the government within seven days of a former beneficiary starting working for them, few do so. This has made it difficult to enforce repayment, according to Kampeta Sayinzoga, the CEO of the BRD. Compliance is even lower among the self-employed, she said.

New measures

One of the new measures the HEC and the BRD have taken to improve repayment is to establish a database of individuals who have benefited from loans and whose whereabouts are known.

“The database for beneficiaries whose whereabouts are known and who are employed is at 90%,” said Sayinzoga, who is optimistic that recovery could soon be easier than before.

“However, the challenge we have is that we have no information about the whereabouts of some loan beneficiaries,” she added.

She said plans to work with other public and private institutions were to be intensified to trace more former beneficiaries who generate income but have been reluctant to start repaying.

These institutions include the Rwanda Revenue Authority, Rwanda Social Security Board, National ID Agency, the Credit Reference Bureau and the Ministry of Foreign Affairs. It is hoped that these institutions could help get additional data regarding the defaulters’ identification.

The BRD is also pushing for reforms to the law that governs the loan scheme to establish and enforce penalties for defaulters.

Some former beneficiaries of the scheme have said they are reluctant to start repaying because the system is disorganised and inconsistent, with some complying and others not.

Dr Rose Mukankomeje, the director general of the HEC, said institutions involved with loan recovery should work with the University of Rwanda to get timely updates about beneficiaries.

She said the HEC will also be registering and updating the list of beneficiaries who get scholarships in the country and abroad.