Risk of losses as government struggles to recover student loans

Graduates at IPRC Kicukiro, Kigali. Poor management of the student loans database has exposed the government to the risk of losing billions of francs to non-repayment. Photo/Cyril Ndegeya

In Summary

• The government is struggling to recover more than Rwf64 billion it lent to students through the Students Financing Agency (SFAR) since the 1990s.
• By the end of last year, it had recovered a paltry Rwf5 billion.
• The revelations are contained in the recent Auditor-General Report, which faults SFAR for incompetence, especially in handling information regarding the database on student loans and recoveries

Billions of francs in taxpayers’ money could be lost due to loopholes in the management of student loans and debt recovery is not transparent.

The government is struggling to recover more than Rwf64 billion it lent to students through the Students Financing Agency (SFAR) since the 1990s. By the end of last year, it had recovered a paltry Rwf5 billion.

The revelations are contained in the recent Auditor-General Report, which faults SFAR for incompetence, especially in handling information regarding the database on student loans and recoveries.

Rwanda Today has learnt that many government entities do not facilitate recovery of loans from their employees by the Rwanda Education Board (REB) and SFAR.

Information on employees who benefited from the scheme is not being given by their employers despite repeated requests by the two bodies.

Sent letters

“Officials from REB and SFAR have sent letters requesting employers to declare their new staff who may have benefited from the loan scheme, but the majority of the institutions are not responding,” said Obadiah Biraro, the Auditor-General.

Alex Ntagungira, the director of public service management and development at the Ministry of Public Service and Labour, said all employers have a legal responsibility to ask their employees to repay their student loans.

“I don’t want to speak on behalf of institutions but, honestly, they know very well that they ought to co-operate fully and provide such records,” Mr Ntagungira said.

Another challenge is the difficulty in getting useful information on SFAR beneficiaries.

Some of the errors in the database include duplication in ID numbers, implying that the particulars of some beneficiaries were captured more than once.

Mr Biraro said that even where employers deduct and remit loan repayments to REB and SFAR, they do not always provide detailed schedules to show the individual employees or the beneficiaries repaying the loans.

This makes it difficult to ascertain whether, indeed, the management of SFAR is recovering the loans so as to sustain the scheme’s operations in the medium and long term, he said.

“There is a need for REB to expedite the process of gathering information on all sponsored students and their repayment status so that the students’ loan database is updated to reflect all loans disbursed and recovered and ensure that the current status of the fund reflects a true picture of the recovered loan balance,” Mr Biraro said.

The Auditor-General recommends strengthening of the legal framework and enforcement of the law to ensure that employers make declarations to REB for deductions made.