HakiPensheni

University of Nairobi students: Helb has given university graduates a one-month amnesty to clear their loans. Photo/Diana Ngila 

By ALLAN ODHIAMBO

In Summary

• Helb says it has granted the one-month waiver to make it easy for the defaulters to pay up and to maximise its loan recoveries.
• The defaulting loanees will enjoy the waiver if they pay the outstanding dues in lump sum between May 6 and June 6, 2013.
• Helb has been levying a Sh5,000 penalty for each month that a loanee fails to service his or her dues, starting from the maturity of the loan.

Graduates who have not paid loans borrowed to finance their university education have one more month to do so without suffering the heavy penalties imposed on defaulters by the agency that administers the loans.

The Higher Education Loans Board (Helb) says it has granted the one-month waiver to make it easy for the defaulters to pay up and to maximise its loan recoveries. The defaulting loanees will enjoy the waiver if they pay the outstanding dues in lump sum between May 6 and June 6, 2013.

“The amnesty is aimed at giving the loanees an opportunity to pay outstanding balances due to the board,” Helb said.

The agency has been levying a Sh5,000 penalty for each month that a loanee fails to service his or her dues, starting from the maturity of the loan.

Accounts that are not active, regardless of previous partial payments, also attract similar penalties that were introduced two years ago to try and discourage defaulters.

On Wednesday Helb said 76,128 loanees owe it Sh8.3 billion, signifying the magnitude of the problem.
Since its inception Helb has supported 375,783 university students with loans worth Sh40.2 billion.

“Out of these, 68,522 beneficiaries have fully repaid their loans amounting to Sh6 billion,” the fund said.

Some Sh12.1 billion disbursed to 133,569 loanees has not matured while 97,565 beneficiaries are currently servicing loans amounting to Sh13.6 billion, translating to a performance rate of 62 per cent.

Imposition of penalties is one of the strategies Helb has used over the years to coerce defaulters into settling their dues. But thousands of defaulters failed to respond even with the threat of suffering punitive measures forcing the fund to adopt new strategies to keep the default rate down.

Director of Public Prosecutions (DPP) Keriako Tobiko in February formed a 13-member team to help track down and deal with defaulters.

(Read: Helb to prosecute loan defaulters and employers)

“The team of prosecutors works with Helb to help it meet its recovery targets. They will work as part of the Helb team and not in my office,” the DPP said on Wednesday.

The list of prosecutors includes Esther Michieka, Joseph Ndegwa, Geoffrey Monari, Michael Lelampaa, Peter Ngega and Naftali Michira. Others are Antony Ogola, Rachael Kipkech, Paul Olang, Robi Bocha, Claude Mukindi, Alice Ayonga and Bernadette Masinde.

The impact of the prosecuting team is expected to be felt in the second half of the year after they are fully inducted into the operations of the revolving fund.

“The prosecutors will also go after employers who have failed to notify the board of employees who are not servicing their loans,” said Victor Lomaria, the head of operations at Helb.
 

More recently, new regulations requiring those seeking public jobs to show certificates of clearance from the loans agency and obtain proof of payment of outstanding loans, has also helped it improve recovery.

Many have rushed to clear outstanding loans for fear of being locked out of public jobs. Many past beneficiaries have cited high levels of unemployment as the main obstacle to prompt repayment of Helb loans. Thousands of graduates have in recent years failed to secure employment rendering them unable to service the loans.

The board requires such individuals to regularly update their status and to negotiate a flexible repayment schedule, including through mobile money platforms such as M-Pesa.

The fund’s loan recovery efforts have in some occasions also been frustrated by employers who fail to deduct the dues from their workers’ salaries for onward transmission to Helb.

The Helb Act requires employers to notify the board within three months of employing a beneficiary of the scheme that provides needy students with subsidised loans to pursue university education.

Upon receiving such a notice, Helb is required to confirm whether the employees benefited from the loans and advise the employer on the monthly deductions.

Helb is seeking to recover the billions of shillings held by past beneficiaries as it moves to reduce its dependence on annual allocations from the Treasury.

Allocations from Treasury are particularly expected to be constrained in the coming months as the government battles with the options of financing its operations amid a poor tax revenue performance, a swelling wage bill and a big budget required to implement the county structures.

The number of students seeking higher education also continues to jump each year, piling pressure on the fund to avail more funds.

Last year, a record 41,000 students were picked to join university, up from the 34,000 admitted the previous year. With high enrolment rates in primary schools and an improving transition rate to secondary school and university, the pressure on Helb’s kitty is expected to mount.

This requires the adoption of effective strategies that would ensure loanees repaid their dues so that new applicants may benefit too.