Helb to prosecute loan defaulters and employers

Helb CEO Charles Ringera.  

By DAVID HERBLING

In Summary

• Helb last month appointed a 13-member team to investigate and prosecute loan defaulters.
• The prosecutors have since traced a number of defaulters who have not responded to repeated warnings to pay up.
• Helb is seeking to recover the billions of shillings to reduce its dependence on annual allocations from the Treasury.

The Higher Education Loans Board (Helb) will this week begin the process of prosecuting university graduates and their employers in a bid to recover billions of shillings owed the government in unpaid student loans.

The university education financier will from Monday start sending demand letters to firms and graduates to start settling the defaulted loans and penalties before April 15, with the employers being fined.

This comes after Helb last month appointed a 13-member team to investigate and prosecute loan defaulters.

The prosecutors have since traced a number of defaulters who have not responded to repeated warnings to pay up. “We will begin issuing defaulters with demand notices and statements this week,” said Helb chief executive Charles Ringera in an interview with the Business Daily last week.

“If they fail to pay up, we will file cases in court to recover the loans. We have already hired prosecutors who have identified defaulters and top companies that are in breach.”

The board estimates that 83,543 university graduates have defaulted and these owed the revolving fund about Sh8 billion as at the end of December 2012.

Helb decided to seek prosecution powers as a last resort after thousands of defaulters failed to respond to punitive measures such as the imposition of a monthly fine of Sh5, 000.

Mr Ringera said the board has information on all defaulters who have benefited from the government-sponsored loan scheme since 1974 under the defunct Higher Education Loans Fund and Ministry of Education loans through the National Bank of Kenya and Kenya Commercial Bank.

The board has already partnered with multiple government agencies such as the Kenya Revenue Authority (KRA), National Hospital Insurance Fund (NHIF), and National Social Security Fund (NSSF) to trace loan defaulters.

The Helb Act spells out penalties for employers that fail to remit funds deducted from workers as five per cent of the outstanding amount. The Act requires employers to notify the board within three months of employing a beneficiary of the fund.

Companies that fail to disclose this information risk a fine of Sh3, 000 per month for each defaulting employee.

Two years ago, the board introduced a Sh5, 000 fines on all past beneficiaries not servicing their loans after the one-year grace period upon graduating.

Past beneficiaries have cited high levels of unemployment as the main obstacle to repayment. The board, however, requires that these individuals regularly update their status and agree to flexible repayment arrangements, including through mobile money platforms such as M-Pesa.

Helb is seeking to recover the billions of shillings to reduce its dependence on annual allocations from the Treasury.

The board offered loans worth Sh5.1 billion to 102, 000 students up from Sh3.6 billion and is targeting to double its monthly collection from the current Sh220 million to meet the growing financing needs.


 Besides recoveries, the board is exploring new fund-raising models including create a revolving fund from the billions of shillings that will be held by Unclaimed Financial Assets Authority (UFAA).