Helb to raise varsity loans ceiling in World Bank deal

The Higher Education Loans Board (Helb) is seeking to raise the maximum loan given to university students by up to 20 per cent with additional funding from the World Bank and UK’s Department for International Development (DfID).

The board’s maximum allocation has remained at Sh60,000 for more than six years and the State agency wants to raise the ceiling to Sh72,000 to reflect the rising living expenses.

The board has been relying on the Treasury and recoveries from past beneficiaries for funds, but the rising number of university students has made it difficult to meet growing demand or raise allocation.

Now, Helb is looking for concessional loans from the World Bank and DfID, hoping to ride on their low interest rates – which are normally between 0.5 per and 0.75 per cent – for onward lending to the students.

This will be the first time the agency will be seeking funds from multilateral lenders as it develops new financing models, including corporate foundations and philanthropists in the race to convert to an education bank by the end of this year.

“Talks with the World Bank and DfID started four months ago and they are ongoing,” said Charles Ringera, Helb chief executive, without giving details on the amount of the loan. “We want to increase the allocation to students by between 10 per cent and 20 per cent. The cost of living has risen over the years which has affected the lives of students, hence the need to review their funding.”

The minimum allocation of Sh35,000 will also be raised by double-digit. Helb has previously mulled over going big on raising cash from commercial banks, but the move has been slowed by the need to increase the interest rate charged on university loans.

READ: Helb seeks alternative finance sources

Students have in the past resisted attempts to increase university fees and rates charged on Helb loans. Presently, post-graduate students pay a rate of 12 per cent on Helb loans while those taking undergraduate studies pay four per cent.

“We have given them (Helb) the leeway to engage with public, private and international partners in mobilising resources,” Education PS Belio Kipsang said. “We hope they will reach a financing deal soon to ensure no needy student is locked out.”

This comes as Helb struggles to balance its budget to cater for 58,000 students set to be admitted to the universities this year.

The Treasury in May allocated Sh5.7 billion to Helb for the financial year starting this month, which included Sh2.4 billion that the loan agency recovered from past loanees.

Helb then said that the cash would be enough to sponsor the students already in universities and that more money is needed for freshers.

Last week, Mr Ringera said that the funding crisis had eased given Helb has raised its recovery target by Sh1 billion and that the Treasury will provide additional funds through a supplementary budget.

“The assumption is that recoveries are Sh2.5 billion yet in reality we are targeting Sh3.4 billion. There is also a supplementary on the way and is not factored in that number,” he said.

“So even if the fresher’s came in just like last year, this number should be about Sh1.9 billion, even if they still moved up by 10 per cent we can’t exceed Sh2.2 billion which I think we can see in the horizon.”

The revolving fund, established in 1995, has so far disbursed Sh40.2 billion to 375,783 students. Only a fifth of loan recipients, or 68,522 graduates, have fully repaid their loans worth Sh6 billion.