Helb wants jobseekers to be screened for loan status

Kenyan jobseekers will soon require the Higher Education Loans Board (Helb) clearance to qualify for employment with private companies, proposed regulations aimed at reducing student loan defaults say.

Helb chief executive Charles Ringera said the agency was working with the Federation of Kenya Employers (FKE) to develop guidelines that would require employers to screen new employees for student loan status when hiring them.

“We are working with the FKE to develop regulations that will ensure employers comply with subsection 16 of the Helb Act and in line with Chapter 6 of the Constitution,” said Mr Ringera, adding that status checks before employment in the private sector is one of the strategies the agency is pursuing to enhance loan recoveries.

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

Those seeking employment with national and county governments and parastatals must also get clearance from the Kenya Revenue Authority (KRA), credit reference bureaus as well as the Directorate of Criminal Investigation.

In recent years, many applicants for public service jobs have been kicked out of interview rooms after failing to produce Helb clearance certificates.

A selection panel set up to establish the Independent Electoral and Boundaries Commission, for instance, disqualified lawyer Isaac Mutoka Shivachi in 2011 from pursuing employment with the agency for failing to repay his Helb loan.

Job seekers have to pay Sh1,000 to get the clearance certificate from Helb, whether or not they benefited from the loan programme.

Private sector employees are currently not required to present Helb clearance certificates before employment but firms hiring graduates have to notify Helb upon recruitment.

Firms are fined Sh3,000 per month for each defaulting employee if they do not disclose to Helb that their workers are past Helb beneficiaries.

Helb also levies a monthly fine of Sh5,000 on all past beneficiaries not servicing their loans after the one-year grace period upon graduating.

READ: Helb to prosecute loan defaulters and employers

Mr Ringera said the law binding private sector employers to demand clearance certificates from Helb before hiring new employees is expected to take legal effect immediately Education secretary Jacob Kaimenyi publishes the new regulations in the Kenya Gazette.

The new provisions are meant to make Helb comply with Chapter Six of the Constitution — which provides guiding principles for governance — meet the demands of the Leadership and Integrity Act.

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

The latest bid to tighten the noose on defaulters comes after Helb stopped advancing internship loans to undergraduate students and reduced the maximum loan amount to Sh50,000 from Sh60,000 per academic year.

READ: HELB sets loans ceiling at Sh50,000 for varsity freshmen

Demand for Helb loans has increased sharply due to the double-intake admissions policy in public universities that has overstretched the agency’s resources.

This is further compounded by the fact that Helb also extends loans to self-sponsored students (commonly known as the parallel degree students) in public universities as well as those enrolled in private chartered universities.

Treasury secretary Henry Rotich allocated Helb Sh4 billion in this year’s budget and the agency had recovered Sh3.2 billion by June 2014 for a total of Sh7.2 billion, barely a half of the Sh14.3 billion the agency needs to meet total loan demands by students.

Mr Ringera said total loan applicants nearly doubled to 110,000 last year from 53,000 in 2013, a demand Helb is unable to meet at current financing levels.

“We are financing only 30 per cent of the students depending on their vulnerability,” said Mr Ringera.

The number of universities has also grown to 68, including 22 public universities, nine public university constituent colleges and 17 chartered private universities.

President Uhuru Kenyatta plans to transform Helb into a bank and allow the agency to float bonds as part of its fundraising activities to meet rising demand for student loans.

The presidential task force on parastatal reforms said the aim is to “transform Helb into an educational development finance institution for financing higher education with the interest on loans retained at current levels and reviews approved by Cabinet”. 

In the current financial year, Helb has disbursed Sh6.2 billion to 144,580 undergraduate students and another Sh153 million as bursaries to both undergraduate and technical, industrial, vocational and entrepreneurship training students.

About 75,498 graduates owe Helb Sh8.3 billion. A total of 88,520 graduates have fully repaid loans worth Sh8.2 billion.

Helb said Sh13 billion disbursed to 144,040 loanees have not matured while 98,676 beneficiaries are currently servicing loans amounting to Sh14.4 billion, translating to a performance rate of 60.7 per cent.