Ouko calls Helb out on recovery of Sh21.9bn loans

The Higher Education Loans Board (Helb) is yet to recover Sh21.9 billion from past beneficiaries of State-backed loans that are due for payment, deepening the agency’s funding crisis and weakening its ability to support fresh students who are set to join universities next month.

Auditor General Edward Ouko has raised the red flag over the growing mountain of graduate loans despite the widening shortfalls in Helb’s capitation.

“Although the board indicated that it has put measures in place to recover the outstanding loans and that there has been an increment in the amounts recovered during the year compared to the previous year, the amount recovered still appears inadequate when compared to the total matured portfolio,” Mr Ouko said in his report for the fiscal year ended June.

Helb has indicated that half of the 67,124 students set to join public universities from next month will miss out on the critical funding due to a Sh2 billion funding shortfall.

Most of the students come from poor backgrounds and require financial assistance to pay their tuition fees and for their upkeep.

The Treasury has rejected the agency’s request for an additional Sh2 billion besides the Sh7.5 billion it was allocated for the fiscal year that started in July. The additional funds were to be made through a supplementary budget.

Helb on Friday, however, sought to downplay Mr Ouko’s concerns, saying the agency had surpassed its recovery target for the fiscal year 2014/15 by collecting Sh3.36 billion instead of the expected Sh3.1 billion.

“Just because the loans have matured does not mean they should be recovered in total in one year but rather over a 10 year period,” said Helb’s chief executive Charles Ringera, adding that the agency was tightening recovery measures to reduce the rate of default that has left a Sh8 billion outstanding debt load.

Mr Ouko’s report shows that the value of Helb’s loans due for payment plus accrued interest and user charges stood at Sh26.18 billion but only Sh3.19 billion was recovered. The report was tabled in Parliament last week.

There has been a sharp rise in enrolment of students in public universities, straining resources at the loans body, whose capitation has been growing at a slower pace.

READ: Half of varsity freshers to miss Helb allocations

University intake increased to 67,124 this year from about 57,000 last year, pushing up demand for financial assistance. About 41 per cent of the new students are women.

“We will only manage to support half of the new applicants from the group that will be joining this year,” Mr Ringera restated on Friday.

“Continuing students will need Sh6 billion in this financial year while new students will require Sh2.7 billion,” he added.

The total Sh8.7 billion needed excludes Helb’s budget for its operations such as rent, utilities and staff pay. The loans will be issued on a first-come-first-served basis and the freshers will be expected to put in their application from next week, Mr Ringera said.

The amount does not also include financing needs of self-sponsored students and those undertaking diploma courses, which have piled additional pressure on the board.

The financial constraints come despite increased Helb allocation from Sh5.7 billion to Sh7.5 billion.

The loans agency in January cut the highest allocation per student to Sh50,000 from Sh60,000 per academic year for freshmen who joined university last year after a four-month delay.

The underfunding has prompted protests from students in recent years.

Helb has in the past opened amnesty windows for defaulters to pay their loans free of accrued fines of Sh5,000 per month.

The agency is also in talks with the Federation of Kenya Employers (FKE) to develop guidelines that would require employers to screen new employees for student loan status during hiring.

Currently, only those seeking employment in government are required to get Helb clearance indicating whether they are servicing or have completed repaying their loans.

Helb also has information-sharing agreements with the Kenya Revenue Authority, the National Hospital Insurance Fund and the National Social Security Fund that it uses to track past loan beneficiaries.

In his audit, Mr Ouko also questioned the accuracy of the value of property, plant and equipment balance of Sh189.13 million, saying it includes a parcel of land – LR No.209/13515 – measuring 0.6 hectares situated in Nairobi’s Upper Hill area, recorded at a cost of Sh44.58 million.

“Although the ownership documents indicate that the land belongs to the board, a discrepancy exists between the deed plan at the ministry of Land, Housing and Urban development and the actual position on the ground,” said Mr Ouko.

Mr Ouko further revealed in his audit that the Kenya Railways Corporation claims that the plot in question was illegally excised from the corporation’s land by the Commissioner of Lands.