Helb loan defaulters drop 20pc on recovery of labour market

Student loan beneficiaries at Helb offices in Nairobi. FILE PHOTO | NMG

The number of former university students defaulting on the Higher Education Loans Board (Helb) has dropped 20 percent in six months, highlighting an economic recovery for beneficiaries.

Helb data shows loan accounts in default dropped to 87,391 holding Sh8.4 billion compared to the 109,661 recorded in February when unpaid loans stood at Sh10.2 billion.

This highlights a rebound in the country’s economy where beneficiaries are making repayments on the strength of their payslips and cash flow from their businesses for those in self-employment.

“Some 87,391 accounts holding a total of Sh8.4 billion are in default, while 235,833 loan accounts valued at Sh36.3 billion are in repayment,” said Helb in a statement.

Kenya National Bureau of Statistics (KNBS) data shows Kenya’s economy rebounded above pre-pandemic levels with the gross domestic product (GDP) expanding 6.8 percent in the first quarter of this year.

Treasury estimates the economy will grow at six percent this year driven by strong growth in the services sector and expansion in industrial output.

Official data shows cash circulating outside the banking system hit a four-month high of Sh252 billion in April, an indicator of economic recovery as Kenyans determined to ride the post-Covid rebound.

Loan defaulters have weakened the Helb’s ability to support the university and technical college students, prompting allocation cuts amid inadequate allocation, and delayed release of cash from the Treasury.

Helb which was established in 1995 is supposed to be a revolving fund in which beneficiaries who have completed studies pay back the loans to support a fresh group of students.

This has, however, not been the case in an economic setting that has been plagued by a hiring freeze on the back of sluggish corporate earnings.

At the peak of the Covid-19 pandemic in 2020, a number of beneficiaries re-negotiated or stopped Helb payments due to layoffs, business closures, and hiring freezes that hurt borrowers’ ability to repay.

The beneficiaries are expected to clear their loans within four years, a pointer to how the jobs market plagued by layoffs and freeze in hiring plans hit young employees.

A four-month 100 percent penalty waiver from March to encourage repayment following the impact of the Covid-19 effects on the economy netted Sh559.72 million contributing to the overall Sh5.2 billion loan recoveries for June 2022.

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