Helb under criticism but who is to blame for stiffer penalties?

Beneficiaries pay their loans at the Higher Education Loans Board (Helb) offices at the Anniversary Towers in Nairobi.Helb has issued an ultimatum to loan defaulters. ]PHOTO:COLLINS KWEYU/STANDARD]

The Higher Education Loans Board (Helb) has come under criticism for demanding money from fresh graduates, who face fines of not less than Sh5,000 for not contacting the board within one year of leaving college and starting repayments.

Helb, which has disbursed loans to more than 400,000 students since its inception in 1995, is owed about Sh6.6billion by the boards beneficiaries.

Helb CEO Charles Ringera, is placing the number of 'difficult accounts' at 68,000. "We have portfolios of another 100,000 loanees holding Sh15 billion that are already paying," says Ringera.

Ringera said it was acting within the Helb Act, which stakeholders, however, want amended.

He says defaulters have themselves to blame for stiff penalties even as it is accused of high-handedness for demanding payments from graduates who are yet to get jobs.

The board has made more than Sh300m in the just ended two-month period it ran an 'amnesty campaign', offering waivers of up to 80 per cent on sums owed for anyone paying in lump-sum.

Contact address

"We were targeting 4,000 people, each paying about Sh165,000. This would have given us about Sh660m. We have had more than 2,000 people paying, which means we registered 50 per cent success," says Ringera.

The number of students currently on Helb loans is 154,000. But the numbers are small compared to demand, with the board able to support up to 200,000 students out of the 520,000 in universities. Now there are calls to emend the Act to align it with the Constitution.

Under the Helb Act, a loanee is required to, within one year of completion of his/her studies, to inform the board of their contact address and begin repayment of the loan plus any interest accrued.

If one is in formal employment they are required to authorise their employer to deduct the loan repayment and remit it to the board. Any loanee who fails to do so is liable to a fine of not less than Sh5,000 in respect of each loan deduction that remains unpaid.

Failure by an employer to notify the board of a loanee also makes the organisation liable to a fine of not less than Sh3,000 for each month it fails to notify the board.

On complaints that Helb's penalties are pushing many beneficiaries into debt, Ringera says it is important for those accessing the funds to know that repayments aren't pegged on one's employment status. " There is no relationship between getting a job and repaying your loan. What we advocate is that you come and tell us where you are and what you are doing so that you can start paying with the little you may have," he says.

Dr John Mugo, Uwezo Kenya's County Coordinator, narrates his experience, but is quick to point out that things may have changed over the years.

Huge interest

Uwezo is an initiative that aims to improve competencies in literacy and numeracy among children in Kenya, Tanzania and Uganda.

"We didn't have enough information then to know what we were getting ourselves into. After completing my studies in 1998, I started paying back my loan because I got a job immediately," he says.

A few months later, Mugo got a scholarship and left the country for five years. "I didn't know my loan was accruing such huge interest until I returned and found that what I owed had nearly doubled," he says. It would take him another six years to repay the loan. He proposes several measures that could increase the board's efficiency like issuing annual loan statements on email and creating simple applications through which one can monitor their loans and get regular updates on their performance.

Former Permanent Secretary in the Ministry of Education Prof James Kiyiapi, says there is need for a proper tracking system for loanees as well as major restructuring in Helb's operations to encourage more people to repay their loans.

He cites the example of countries in the West like Canada, where one regularly fills an unemployment form, which entitles them to State benefits. By so doing, it is possible to keep track of an individual.

Blanket penalties

A similar approach, says Kiyiapi, can be adopted for university graduates for Helb to determine at what stage loanees are and whether they are able to meet their financial obligations.

"If Helb could make it clear that there would be no interest accrued on a loan for as long as one has no source of income, then I believe more people would turn up," he says.

"I don't think imposing blanket penalties is the solution. Helb should estimate the percentage of students that can reliably be expected to repay their loans. Expecting that all graduates will repay their loans and banking on this money is a gamble," says Kiyiapi.

Vibrant economy

Kiyiapi says the number of defaulters could also be reduced where there is a more vibrant economy in which one can study and work, as well as an elaborate internship system that absorbs graduates into various sectors.

According to Ringera, Helb is improving its compliance risk assessment and exploring options to net defaulters, including sharing information with Credit Reference Bureaus. "We now have 15 prosecutors and have issued prosecution notices to several corporates with good response," he says.

Other proposals by the board are introduction of 'Helb brand ambassadors', and 'whitelisting', the reverse of blacklisting, which will provide recognition and access to other financial services for those repaying their loans.

Helb is also working with professional bodies like Law Society of Kenya (LSK) and Institute of Certified Public Accountants of Kenya (ICPAK) to ensure members who default on their loans are denied clearance when seeking to renew licences.