Loans board hires prosecutors to pursue defaulters
Graduands at a past ceremony. Helb loan defaulters will now be prosecuted as the board steps up efforts to recover about Sh8 billion. File
What you need to know:
The team will help the Higher Education Loans Board track down and prosecute graduates who owe the revolving fund about Sh8 billion in unpaid loans.
The 83,543 defaulters owed the board a total of Sh8 billion at the end of December 2012.
Helb has disbursed Sh38 billion to about 360,000 beneficiaries since inception and has recovered a total of Sh5.8 billion from 65,913 graduates.
The quest to recover billions of shillings that university graduates owe the government intensified last Friday with the appointment of a 13-member team to investigate and prosecute loan defaulters.
The team members, whose names were published in the official Kenya Gazette, will help the Higher Education Loans Board (Helb) track down and prosecute graduates who owe the revolving fund about Sh8 billion in unpaid loans.
Helb said on Friday that the team appointed by the Director of Prosecutions, Keriako Tobiko, will mainly pursue 83,543 loan defaulters who have not responded to repeated warnings to pay up.
“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.
Mr Lomaria said the board had decided to seek prosecution powers as a last resort after thousands of defaulters failed to respond to punitive measures such as the imposition of a monthly fine of Sh5,000.
“We have had to resort to legal action because many people are not taking their loan repayment obligations seriously,” he said.
The 83,543 defaulters owed the board a total of Sh8 billion at the end of December 2012.
Members of the team appointed by Mr Tobiko have been trained in investigation and prosecution procedures, including a three-month course at the Criminal Investigations Department.
They include 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.
Mr Lomaria said the specialised nature of the cases required individuals with inside knowledge of Helb operations and prosecution skills.
Helb has disbursed Sh38 billion to about 360,000 beneficiaries since inception and has recovered a total of Sh5.8 billion or 15.2 per cent of the total from 65,913 graduates.
Some 95,909 beneficiaries are servicing Sh13 billion worth of loans.
The balance of Sh4 billion is in the form of loans that have not matured, including money lent to 116,300 students this year, 102,000 in 2012, 80,000 in 2011 and 72,000 in 2010.
Undergraduate students get between Sh35,000 and Sh60,000 from Helb.
“This prosecution team will complement gains we have made so far through integrity, the requirement in the Constitution that has blocked defaulters from seeking leadership positions,” said Mr Monari who heads the investigations team.
“We intend to start prosecuting these cases as soon as possible.”
Past beneficiaries have cited high levels of unemployment as the main obstacle to repayment. The board, however, requires that these individuals regularly update their status and agree to flexible repayment arrangements, including through mobile money platforms such as M-Pesa.
Two years ago, the board introduced a Sh5,000 fine on all past beneficiaries not servicing their loans after the one-year grace period upon graduating.
In the United States, university loan defaulters are penalised up to Sh17,000 ($200) a month for failing to pay up.
Helb’s annual collections stood at Sh2.52 billion at the end of the financial year to June 2012, a 9.5 per cent improvement from the previous year’s collection of Sh2.3 billion.
The board has so far collected Sh1.3 billion in the current financial year against an annual target of Sh3 billion.
Federation of Kenya Employers executive director Jacqueline Mugo said employers were supportive of loan repayments even as she acknowledged that labour movement remains a unique challenge to the effort.
“The rate at which some employees change jobs presents a challenge to the board on how well to track these movements and continue with the monthly deductions,” said Ms Mugo, who also sits on the Helb board.
“Employers and Helb need to develop a more robust method of tracking such labour movement.”
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. The large number of students seeking higher education has necessitated sustained and extra funding from the government.
The number students in both public and private universities rose sharply two years ago with the double intake to clear a two-decade admission backlog. The public universities admitted 32,671 freshmen that year — 12,000 more than the 2010 admission.
