The Higher Education Loans Board (Helb) has started talks to access billions of shillings whose owners cannot be traced to meet the growing financing needs in Kenya’s expanding universities.
It is negotiating with the board of the recently created Unclaimed Financial Assets Authority (UFAA) —which was established last year to take charge of among others, bank deposits, unpaid dividends and pension savings said to be worth Sh200 billion.
The financier says it wants to create a revolving fund from the money that will be held by the authority and use it to finance students in Kenya’s universities and tertiary colleges and plug the growing financing gap.
The CEO of the board Charles Ringera said the agency is exploring new fund-raising models to cut its reliance on the government and recoveries from beneficiaries of the fund.
“We are studying models that have been used in other parts of the world where a fraction of the unclaimed assets is channelled towards education financing,” said Mr Ringera in an interview with Business Daily Thursday.
“There is need for innovation in terms of resource mobilisation to meet growing demand and reduce reliance on the Treasury. We have been meeting board members of the authority to see how we can use the unclaimed assets to finance education.”
For example, the State of Florida in the US uses proceeds from unclaimed assets to fund public education.
Besides this, it is targeting international development agencies and private lenders to bridge the growing funding gap.
It plans to partner with institutions such as MasterCard Foundation, Ford Foundation and USAID by turning their bursary and scholarships schemes into a low-interest revolving fund to benefit more students and ensure sustainability of the funds.
Helb projects that the number of students seeking tertiary education financing will grow almost sevenfold from the current 118,000 students to about 800,000 in 2015 when the first batch of beneficiaries of free primary education join universities and colleges. The free schooling was started in 2003.
The board estimates it will require Sh56 billion to meet higher education needs in the year 2015 hence the need to explore alternative sources for its revolving fund.
Finance minister Njeru Githae in November appointed members of UFAA who are expected to appoint a management team—which is yet to happen.
The establishment of the board paves the way for transfer to the government all financial assets held by both public and private institutions whose owners cannot be traced.
Publicly listed companies have been issuing public notices to shareholders to collect unclaimed dividends, which form a substantial portion of the unclaimed financial assets estimated to be worth more than Sh200 billion.
Other funds that the agency will collect include unclaimed initial public offering (IPO) refunds, bonus shares, insurance payments, pension dues and bank account balances.
The new body will be expected to announce procedures for surrender of the funds.
Money held by the agency will be invested in socially beneficial projects and public infrastructure.
Institutions that hand over such funds will cease being held liable for them, passing over the liability to the UFAA.
The University Act which was passed by Parliament early this year requires HELB to fund learners based on the Differentiated Unit Cost (DUC) where students will be given loans according to the cost of the course being studied.
“Beginning next financial year, we will disburse loans based on programme of study as is required by law,” said Mr Ringera.
Currently, the fund gives out loans ranging from a minimum of Sh35, 000 to a maximum of Sh60,000 and the amount loans is based on the students financial health rather than the course.
Under the new scheme, students taking science courses such as medicine, nursing and engineering will be given more money in line with the requirements of these courses, which tend to be expensive compared to social science degrees.