Corporate

Universities seek World Bank bailout on biting cash crunch

kiama

University of Nairobi vice-chancellor Stephen Kiama at a past event. PHOTO | NMG

Public Universities are seeking a Sh2.4 billion World Bank bailout to alleviate an acute cash crisis that is threatening to ground their operations.

The Universities Fund (UF) has revealed that it submitted a request for a grant to the World Bank to plug the funding shortfall amid rising number of government-sponsored students.

The agency said the request is part of its resource mobilisation efforts to enable the universities to secure alternative resources to supplement government funding.

“We have made a Sh2.4 billion grant request to the World Bank as part of our alternative resource mobilisation activities,” said UF chief executive officer Geoffrey Monari.

The institutions of higher learning are struggling to honour obligations such as payroll taxes, retirement benefits, and insurance premiums for employees.

Among the outstanding remittances is a PAYE bill of Sh13.7 billion, pension bill of Sh18.5 billion, cooperative or sacco contributions of Sh4.1 billion and Sh4.5 billon owed to part-time lecturers.

The cash crunch at the public universities is linked to the sharp decline of students enrolling for the parallel degree programme courses over the past four years. This segment of students generated billions of shillings for the institutions.

Allocations from the State have been on a downward trajectory in recent years, which has slashed student capitation, worsening the financial woes of public universities.

For instance, the universities need Sh32.6 billion to support the 2022 freshmen cohort of 145,145 but the government has only made available Sh12.5 billion or a third of their funding needs. The incoming cohort is larger than the graduates exiting by 52,195.

State funding to universities is based on the differentiated unit cost (DUC) model under which institutions get allocations based on the number of undergraduate students registered on the regular programme and the kinds of courses they take.

Under the model, the government is expected to cater for 80 percent of the unit cost while the remaining 20 percent is borne by students and institutions.

At 80 percent sponsorship, the government should pay Sh720,000 for a clinical medicine degree compared to Sh240,000 in the social sciences.

But the funding ratio has been dropping steadily in the past five years to the current 48.1 percent of the unit cost on stagnant government funding.

Read: Universities launch fresh push to triple tuition fees

The number of government-sponsored students has increased by 122,970 to 356,188 between 2019 and 2022 while the approved budget in the review period increased at a slower rate by Sh5.92 billion to Sh44.02 billion.

The situation is worse in private universities as they have a total of 78,650 government-sponsored students with a DUC requirement of Sh12.28 billion against a budget allocation of Sh3.37 billion (21 percent of the DUC).

Overall, the budget requirement to cater for the State-sponsored students at 80 percent of the unit cost in the current financial year is Sh87.31 billion against the Sh47.39 billion allocated, resulting in a budget deficit of Sh39.91 billion.

“Resource mobilisation is an important mandate of the Fund as it will assist ease the pressure on the government to fund universities,” said Mr Monari.

He said aside from the World Bank, the agency had engaged various donors and partners who are willing to support sector specific programmes such as mining, agribusiness and climate change.

Under its Strategic Plan for 2021-2026, the UF has stated it will source funds through proposal writing to development partners, including multilateral, bilateral agencies and international financial institutions (IFIs).

Funds disbursed as student capitation are critical in the running of the universities, accounting for nearly 30 percent of the source of money used to pay salaries and day-to-day utilities.

The declining student capitation has led to ballooning pending bills in the universities, standing at Sh56.1 billion in the year to June 2022.

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