Economy

Helb to borrow Sh22bn for student laptops

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Helb chief executive Charles Ringera. PHOTO | JEFF ANGOTE | NMG

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Summary

  • The Higher Education Loans Board (Helb) plans to borrow Sh22 billion through a bond to fund laptop purchases for university students.
  • The number of government-sponsored students in public universities has grown rapidly in the past few years due to the lowering of the entry grade to public universities to C+.
  • A special purpose vehicle will be formed to manage part of Helb’s loans and receivables, with the inflows to be used to repay the bond interest.

The Higher Education Loans Board (Helb) plans to borrow Sh22 billion through a bond to fund laptop purchases for university students.

The agency said on Tuesday it will issue its first so-called social bond to supplement government capitation that has failed to keep pace with the growing student enrolment.

The number of government-sponsored students in public universities has grown rapidly in the past few years due to the lowering of the entry grade to public universities to C+, outpacing Helb’s funding from the State.

“Initially we estimated this to be Sh5.5 billion. However, looking at the application of these funds, which is to finance students to acquire laptop loans for purposes of e-learning ... we estimate this now at Sh22 billion,” said Helb CEO Charles Ringera.

“The current university enrolment is at 700,000. Only 20 percent of these students have laptops, leaving over 560,000 in need of laptops. At a price of Sh45,000 for a reasonable laptop, then you can now see the actual demand – but we could start this progressively by issuing these in tranche notes.”

The Treasury and the Capital Markets Authority (CMA) have approved the plan to issue the bond, according to Helb. The agency, which is seeking a transaction adviser for the issuing of the bond, said it has secured a sovereign guarantee from the government for the bond.

The bonds are expected to be issued with a tenor of seven years. The investors targeted include pension funds and social impact investors.

A special purpose vehicle will be formed to manage part of Helb’s loans and receivables, with the inflows to be used to repay the bond interest.

The agency says it has current assets worth Sh110 billion that can be used to back the bond. Helb is currently funded largely through capitation from the Treasury and interest from student loans.

In the current financial year, Helb says its funding gap is estimated at Sh3 billion attributed to over 75,000 students in universities and technical and vocational education and training (TVET) colleges.

The cash-strapped Helb said earlier this year it had run out of cash, setting university freshmen for a tough life at the beginning of their studies.

Helb had said the freshmen, who joined public universities in September, would have to wait till the Treasury offered it Sh3 billion for initial disbursement.

The majority of loan applicants come from poor households and require financial support from Helb to pay for their tuition and upkeep.

Most universities require full payment of a semester’s fees to admit students and delay in disbursement, therefore, risk forcing some freshmen to postpone their studies.

Aside from traditional resource mobilisation, Helb has been looking at other strategies such as seeking social investors and raising debt both locally and internationally.

Loan defaulters have weakened the agency’s ability to support new and continuing students, prompting a 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.

The agency funds needy students to the tune of between Sh35,000 and Sh60,000 per year each, based on their economic background.

The ballooning number of defaulters is linked to the high level of unemployment in the country and the migration of beneficiaries to the diaspora in search of greener pastures.

Data from the Universities Funding Board (UFB) — the State agency that guides the allocation of cash for students — shows the population grew 23.2 percent to 324,182 in the year ending June from 271,446 last year.

Annual allocation to Helb by the Treasury has jumped from Sh7.5 billion in 2015 to Sh15.2 billion, but it has failed to keep pace with rising student population.

In 2013, the agency started the external resource mobilisation drive as it develops new financing models, including corporate foundations and philanthropists in the race to convert to an education bank.

Funds raised through the alternative sources hit a new high of Sh1.64 billion in the fiscal year ended June 2021 from a low of Sh189.9 million in the year ended June 2014.

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