The Higher Educations Loans Board (Helb) is seeking Sh10.98 billion ($100 million) syndicated loan from an undisclosed US multinational to plug funding gaps.
The agency Tuesday told Parliament it was in discussions with the Ministry of Education and the Treasury on the possibility of taking the debt instrument at an interest rate of seven percent.
The Higher Educations Loans Board (Helb) is seeking Sh10.98 billion ($100 million) syndicated loan from an undisclosed US multinational to plug funding gaps.
The agency Tuesday told Parliament it was in discussions with the Ministry of Education and the Treasury on the possibility of taking the debt instrument at an interest rate of seven percent.
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.
This will be the first time the agency will be seeking funds from foreigners as it develops new financing models, including corporate foundations and philanthropists in the race to convert to an education bank.
“What the funder is looking at is to give us $100 million at a price of about seven percent,” Helb CEO Charles Ringera told the National Assembly committee on Education.
“Treasury has to give us the sovereign guarantee for us to be able to attract that funding.”
According to the Act establishing the Helb, the agency is supposed to solicit for funds from development partners, corporates, counties and foundations among others to finance its operations.
Helb reckons that students will continue to pay an interest of four percent despite the agency tapping the foreign credit at a higher interest.
“Treasury has to give us the sovereign guarantee for us to be able to attract that funding,” Mr Ringera told the lawmakers.
Treasury allocated Helb Sh16 billon in the current financial year to finance its activities, Sh5 billion of which is supposed to be raised from loan recoveries amid growing numbers of defaulters.
About 106,443 former university students have defaulted on their Helb loans in the wake of Covid-19 pandemic that triggered layoffs, business closure and freeze in hiring.
Helb is meant to be a revolving fund where beneficiaries who have finished their studies pay back the loans to support a fresh group of students.
Loan defaulters have weakened the agency’s ability to support new and continuing students, prompting reduction in allocations. The average loan allocation in the current financial year is Sh37,000 per student per year, down from Sh45,000 the previous year.
Helb matured loans stood at Sh45 billion, giving the agency a non-performing ratio of 23 per cent—which is higher than the banking average of 14.1 per cent.
Currently, the Helb has 37 funders including Family Bank, I&M Foundation and KCB Foundation who have contributed a total of Sh1.5 billion to the Board.
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