HE as a public good: Kenya’s financing conundrum

This article discusses the expansion of university education in Kenya as a public good, which started with the establishment of the University of Nairobi in 1970. Since then, the government of Kenya has rapidly expanded university education, both public and private, in response to demand.

However, this rapid expansion has been supported by a cost-sharing financing model, which according to some scholars, contradicts the concept of higher education as a public good.

It is worth exploring the relationship between the transformation of the financing model and university education as a public good in Kenya’s context.

In many countries, including Kenya, government policies have increasingly viewed the benefits of higher education as private economic gain, leading to a shift towards cost-sharing and market forces in university education. This raises questions about whether higher education is a public good or a private good.

What is a public good?

In 1954, Paul Samuelson defined public goods as non-excludable and non-rivalrous. If a good is non-excludable, it is available to all and consumption by one person does not affect its availability to others. Higher education should fulfil these criteria to be a pure public good.

According to Joseph Stiglitz, knowledge is considered a public good, and as knowledge is the unique claim of higher education, it is also a public good.

However, debates on the extent to which higher education should be treated as a public good centre on whether it should be free for all or a private good due to some of its benefits being solely to the individual.

Some scholars such as Nicolas Barr argue that free higher education restricts access and others argue that market mechanisms cannot efficiently provide equitable higher education.

Kenya has aimed to increase access to higher education and finance it appropriately. Since 1971, the government has used student loans to extend and redistribute university education opportunities. Kenya cautiously expanded university education initially, introducing a university loan scheme in 1974.

Although this did not significantly increase access, greater use of cost-sharing later on, especially since 1999/2000 can be linked to the expansion of access to higher education as shown in the figure below.



Tertiary education enrolment (gross) in Kenya, Sub-Saharan Africa and World. Source: Constructed by this article’s author based on World Bank Open data

The 1974 loan scheme in Kenya did not lead to substantial expansion of university education due to poor loan recovery.

However, the University of Nairobi expanded by adding more faculties and campuses. In 1995, the Higher Education Loans Board (HELB) was established as a new state corporation to provide support for undergraduate students with loans based on individual needs and the board’s resources.

The loans range from KES35,000 (US$267) to KES65,000 with a 4% interest rate per year. Repayment begins within one year of the completion of studies.

In the figure below, the number of non-paying loanees during the pre-HELB period (1970-1995) is compared to the post-HELB period (1996-2017). As of 2017, there were a total of 179,692 non-paying loanees, consisting of 27,926 from the pre-HELB era and 151,766 in the post-HELB era.



The number of non-paying loanees (pre-HELB and post-HELB). Source: HELB, Kenya, 2019

Greater selectivity

The difference in the overall trend between pre-HELB and post-HELB periods is due to the significant increase in undergraduate education participation, leading to a larger number of borrowers who are experiencing difficulty in repaying their loans.

This outcome suggests that the burden on taxpayers has increased as higher education participation has risen in relation to available employment opportunities for graduates.

However, the expansion of higher education has the potential to bring about many non-monetary social benefits, which constitute the public good aspect of higher education.

Elizabeth M Appiah and Walter W McMahon highlight that these benefits may not be apparent when only a few individuals participate in higher education and may take between 25 to 40 years to fully manifest in society.

The depicted trend in loan non-payment, illustrated in the following figure, implies that the concept of cost-recovery is intricate in situations where loan beneficiaries cannot obtain employment to repay their loans.



Growth in non-paying loanees (1970-2017). Source: HELB, Kenya, 2019

It has been confirmed that loan recovery in Kenya has been weak, which can be attributed to various reasons. One such reason is the lack of selectivity in admitting students to university.

Currently, there is little attention paid to developing a financial needs analysis which could lead to greater selectivity. In order to ensure that academically qualified students from poor families are not excluded, and those from more economically able families can contribute to their higher education, greater selectivity is necessary.

Currently, all students admitted under the government scheme are automatically enrolled in the HELB scheme, regardless of their family’s ability to pay, aligning with the concept of making higher education ‘free at the point of use’.

However, if loans were to be recovered more effectively, it would generate more resources for extending and redistributing educational opportunities, thus realising the objective of equity.

Recovery rates are also low due to the tough labour market faced by many graduates, which makes it difficult for them to secure the long-term, stable employment needed to repay their higher education loans.

Inequality

Kenya’s higher education is highly unequal.

The following figure displays the distribution of students in higher education based on their socioeconomic background. Despite the presence of financial assistance through HELB, Kenya’s higher education system remains highly unequal.

The disparity ratio of 49 indicates that individuals from the highest income group are 49 times more likely to pursue higher education than those from the lowest income group. This inequality is not solely a result of higher education, but can be traced back to primary and secondary education where students from poorer backgrounds tend to have less academic success compared to those from wealthier families, as stated in the World Bank report of 2019.



Enrolment rates of Kenyan students by income quintile (2016). Source: World Bank, 2019

Kenya introduced a pay-as-you-go scheme in around 1998/1999 as a means of financing higher education and increasing access, in addition to HELB.

This scheme, known as the ‘Parallel Programme’ or ‘Module II’, involved admitting a cohort of students into public universities and offering them parallel teaching of courses already offered in mainstream programmes, but with the students required to pay the full market rate cost of their education upfront.

The majority of these students came from families who could afford to pay the parallel programme fees. While the scheme has received some praise, it has also faced several challenges, including incentives for universities to prioritise the parallel programmes over providing a quality education and university experience for students.

In some cases, courses were created hastily to meet student demand, even if they could have been offered at a diploma level.

Nevertheless, as shown in figure 1, this approach significantly increased access to higher education since 1999 until it was literally stopped by the government a few years ago. This led to financial problems in public universities which had got accustomed to relying on parallel student fees as a significant source of university finance.

Currently, there is a Presidential Commission looking into the education sector, including a higher education finance model that can be sustainable.

Financing models

Let us consider financing models and the unintended public good of widening participation in higher education.

The value of higher education as a public good and the various financing models must take into account both its direct and indirect benefits. These include contributions to economic growth, political stability, and the rule of law, which can have long-term effects on future generations.

Kenya’s higher education financing history can be divided into two phases: a free and low-key loan scheme from 1963-1983 and a loan scheme and pay-as-you-go financing from 1984 to the present.

The government’s expansion of university education during the latter phase has had several benefits, such as strengthening civil society and supporting democratic space in the country.

However, cost-sharing and direct upfront payment may have shifted costs further onto students and potentially compromised the quality of university education. As of 2018, according to the Commission for University Education, Kenya had 31 public chartered universities and six public university constituent colleges, with the education of the current generation expected to benefit future generations.

Conclusion

In Kenya, the primary objective of state universities has been to produce enough human resources for the civil service, national corporations, and private sector, as well as to foster an intellectual community within the country.

Through cost-sharing initiatives, public higher education has grown rapidly from a single university to approximately 34 public universities and constituent colleges as of 2019.

While some scholars argue that higher education should remain a public good, other scholars suggest that expanding access to fully taxpayer-financed higher education presents normative issues given other educational goals such as expanding equitable quality basic education.

Despite the debate, in Kenya, the transformation of the financing model has contributed to the expansion of higher education and served a public good purpose. It is clear that these two processes have influenced each other, with Kenyan universities playing a role in developing an Africanised civil service and democratic space in the country, as noted by Professor Maurice Amutabi.

However, the government's introduction of student loans suggests that the benefits of higher education are now viewed as private economic enrichment, and students are expected to contribute to its costs.

Moses Oketch is a professor of international education policy and development at University College London (UCL), United Kingdom. He also co-directs the UCL Centre for Education and International Development. His research interests include market and non-market effects of higher education on development in Africa; higher education finance; and the economics of education. This article is a summary based on the study “Higher Education Finance as a Public Good in Kenya” published in the Journal of Higher Education in Africa.