Charles Ringera is the CEO of the Higher Education Loans Board. He spoke to our writer HENRY WANYAMA.
The Higher Education Loans Board (HELB) is enticing loan beneficiaries with an 80 per cent waiver on penalties for individuals who pay their outstanding loan in lump sum. How is the response?
Good! But we could do better. The pickup was slow because so far we are at Sh200 million out of the targeted Sh640 million. About 4, 000 people have been targeted with each individual expected to pay Sh165, 000 which has not been the case — instead individual payments are ranging around Sh120,000 since the majority of those repaying their loans have a lower average loan due to the huge discount we are giving of 80 per cent.
A total 2,000 individuals have also come forward for discussions, a usual streak with Kenyans there were longer queues at the June 30 deadline.
Overall, we have collected about Sh3.1 billion out of the target Sh3.5 billion.
You have brought on board the Kenya Revenue Authority as a partner to track loan defaulters going back to 1995, you sent demand notices and statements to the said beneficiaries. What action would you take against them?
The strategic partnership with KRA is not primarily meant to recover loans, but to identify individual defaulters in terms of their income besides also being a key verifier for the guarantors of student loans in terms of the declared incomes by the student for purposes of assessing their needs.
We have other strategic partnerships with the Registrar of Persons, NHIF and NSSF where we compare data and this has received very positive traction in terms of tracing loanees.
Within the umbrella of Association of Kenya Credit Providers (AKCP) of which I am the current chairman, we are also supporting credit scores of borrowers with an intention to build each borrowers credit profile for purposes of deepening and making credit more affordable in the country. AKCP as a successor of the Credit Reference Bureaus which are licensed and regulated by the Central Bank of Kenya, the two continue to give individual credit scores on credit worthiness of a borrower.
The previous regime used to blacklist individuals with poor scores as a result of default, but we now want to do a ‘White list’ — a positive credit score for individuals intending to borrow. HELB, micro financing institutions, utility companies in electricity, water and telecommunications will use such credit score when granting any kind of credit. The whole intention is to have every Kenyan know his or her credit score for ease of borrowing and credit granting process by credit providers.
This would lead to a big data collection under AKCP.
Secondly, we shall forward the defaulters identified through our collaborations with KRA and other strategic partners to debt collectors at their cost. This will be after we confirm that they are engaged in gainful economic activities and can repay their loans but are not repaying.
Do you offset loans for the deceased and diseased?
Yes, because we have insured them, but the family must co-operate with estate administrators so that if we are satisfied to the point that there is no other assets the deceased have then we proceed to write-off the loan.
The problem here is that people don't give information as required and also not timely enough. Next year, from July, we plan to put up insurance for undergraduates loan portfolio as we have done for post-graduate portfolio.
But we have had complaints that you take too long?
True, this is because some people don't provide information as required — one is supposed to know all that is required by HELB. The shortest time it is supposed to take to be served conclusively is 24 hours as per our service charter. But that is only possible if they supply all the information required.
There is a proposal to use unclaimed assets to finance higher education. What is the progress?
We are doing very well on this front. We have presented our proposal to the Unclaimed Financial Assets Authority, stakeholders, consultants formulating the regulations, Ministry of Education Science and Technology (who are leading the policy reforms) and The National Treasury.
Ideally, we are consistent what other countries who have gone this route like the State of Florida in the USA, Ireland and New Zealand to mention just but a few.
Globally the reunification rate — that is, unifying assets with owners — stands at 20 per cent at best. The 80 per cent therefore is ordinarily non-reunifiable even when you put a lot of reunification effort. A state like Florida transfers up to 60 per cent of the assets to Higher Education funding since it is one of the strongest transformation tools of society through provision of education.
What is the status of HELB Loans repayments so far?
As mentioned before, we have this year collected Sh3.1 billion to date. But something to say in the face of these recoveries, there is an attitude of beneficiaries on loan repayment. Loanees think these are state funds and as such they are not supposed to be repaid. Consequently, this is challenging the core mandate of the Board of creating a national education financing revolving fund. This denies another Kenyan a chance to pursue higher education. People need to realise that if they do not repay their loans and in retrospect denies future generations higher education they are committing a social economic crime that needs to be punished by the law. There is need to cause a social transformation in Kenya that even when you exceed your payments, you willingly donate to the board the extra shilling to finance future generations.
We currently have mobilised in excess of Sh262,000 from past HELB individual loanees, HELB Board and staff members in funding the ballooning students loan budget deficit within the last two months only. I see a lot of potential in this fundraising agenda and we have specifically recruited a Fund Manager to steer the extra shilling.
What is the status of HELB Loans disbursements since inception?
More than 415, 000 university students have benefited from HELB since inception in 1995, totaling to over Sh46 billion. In the financial year 2013/14, we spent more than Sh6.8 billion to give loans and bursaries to over 180,000 students in both universities and Technical Vocational Education Training institutions in Kenya and East Africa.
Transforming HELB into a bank exists in your strategic plan 2013-18, what other plans are there?
To convert HELB into a Development Financial Institution (DFI), not a commercial bank, is a follow up to recommendations by the Presidential Taskforce to overhaul policies and laws governing state corporations.
The HELB DFI is meant to develop human capital skills in the country as an enabler to Vision 2030. As such HELB will therefore become a Development Bank.
As we enter the development bank space, the effort is not to increase interest rates, neither do we want to target collaterals as security before giving out loans. In fact the Presidential Taskforce on Parastatal Reforms specifically directed that the reformed HELB DFI cannot change interest rate without Cabinet approval.
I see the importance of creating a HELB DFI in four ways.
Firstly, the board would take advantage of its strong balance sheet which is currently in excess of Sh40 billion. The Board has created a strong core capital but that capital is not taking on board available avenues to accommodate innovative products that can unlock huge sums of money to cover the current funding gap. It is indeed possible to create Asset Backed Securities as vehicles to unlock wholesale international funds.
Secondly, we'll be able to develop education savings products that can be mobilised as savings to fund future cost of education.
Thirdly, there would be fund raising through issuance of long term education bonds, particularly offshore which are cost effective and within our lending rates of four percent for undergraduates and 12 per cent for postgraduates.
Fourthly, funds management both at constituencies and counties will improve. For example, currently we are managing education funds for Tinderet and Naivasha constituencies while discussion with Meru, Nakuru, Embu and Nandi Counties are at advanced stages. The effort here is to pool funds from these sources for the benefits of their citizens within HELB so that it can complement the National Fund and rationalize the payment and recovery process to create County/Constituency Education Revolving Funds.
Do you have plans to increase the revolving fund amount?
Yes, we are working round the clock to see how we can increase the student loan portfolio from the current Sh7 billion to Sh19 billion by the year 2018 — this is at the core of our strategy. It is a stretched target but as a Board have dared to dream and trust that it is achievable.
This year, for example, the demand is about Sh10 billion but we think we should at least pull through 80 per cent of this which would be excellent given the number of students in universities and colleges.
The budget allocated to you for 2014/15 is Sh5.7 billion. Is it enough?
Contrary to fears that HELB might not be able to give the minimum loan at Sh35,000 and the maximum Sh60,000, that is not the case, although it is apparent that the figure needs to be improved. We are looking at alternative ways of raising cash for higher education as mentioned above. We are committed to this to see that our students are more comfortable given the rising inflation. We as a Board are looking at how this range of Sh35,000 and 60,000 can be up-scaled. All this depends on our effort to seek alternative funding which is a key priority for the Board.
We are also enhancing our loan collection/recoveries capacity through a couple of initiatives currently running or proposed. The recent waiver is one such effort. We will also be bringing HELB Compliance not only as part of requirement for staff recruitment but also for supply of goods and services pursuant to Chapter 6 of the constitution. We intend to be more aggressive in the Diaspora space where a number of loanees have migrated to. As such you will see shortly our comprehensive agenda of appointing HELB Brand Ambassadors who will tell our story and also help the Board on loan recoveries. We now have Private Debt collectors on board who are doing a good job on recoveries.
What about TVET institutions, how much have you set aside for them?
Just like last year we have Sh400 million for TVETs in the form of loans and bursary.
Though the uptake is low we normally give bursaries of between Sh8,000 and Sh15,000 while loans go up to Sh30,000. The average cost of training in TVET is Sh55,000 per annum and hence the TVET loan from the Board covers over 80 per cent of the tuition fees.
Where has the planned smart cards system reached?
Seven banks have partnered with us to use the cards in transactions. Family Bank with KeMU University is now fully operational, while KCB and Equity banks are at advanced stages of launching at Egerton and Nazarene University respectively.
At some point we shall issue a deadline to any student borrowing from the Board to be on smartcard for more efficiency of funds disbursement. The cards will have various e-wallets for upkeep and tuition.