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Rich students gobble varsity bursaries and loans in Kenya

World Bank says the allocation of student aid by several government agencies and in an uncoordinated way creates room for unfair distribution
In its latest analysis, the World Bank says the allocation of student aid by several government agencies and in an uncoordinated way creates room for unfair distribution. FILE PHOTO | NMG 

State-backed scholarship and bursary schemes are not benefiting thousands of poor students pursuing higher education in Kenya due to lack of transparency, a new World Bank report said, noting that those from rich families benefited more from such public funding.

In its latest analysis, the World Bank says the allocation of student aid by several government agencies and in an uncoordinated way creates room for unfair distribution.

“For instance, students in need of financial support can be eligible for constituency bursaries, county bursaries, government scholarships, and student loans administered by the Higher Education Loans Board (Helb). This has resulted in inappropriate targeting and lack of transparency in the allocation of student aid,” says the World Bank.

Helb is currently a main source of financial aid for students in higher education.

In accordance with the current Cost Sharing Policy by the government, a student is required to pay Sh50,000 per year to train at a public university.

Out of this amount, Helb can award a maximum loan and bursary of Sh60,000 and Sh8,000, respectively subject to availability of funds.

The loans are subject to an interest rate of four percent per year, and students are expected to start repayment of their loans within one year of the completion of studies.

Unequal configuration

The World Bank analysis, however, showed an extremely unequal social configuration of the Kenyan higher education system in spite of the availability of financial aid amid a disparity ratio of 49 -- meaning that a young Kenyan from the richest income group is 49 times more likely to access higher education than one from the lowest income group.

“Notwithstanding the lack of data on the socioeconomic distribution of the various types of bursaries and loans available to students, it is safe to assume that a larger share of government subsidies goes to students from the richer family groups than from the lowest socioeconomic groups and that financing may still be a significant barrier for many needy students,” the report says.

“The Kenyan situation is consistent with the extensive international literature showing that the cost of higher education is a deterrent for young people from low-income groups,” it adds.

To help correct this imbalance, the World Bank recommends a radical overhaul of loans and bursary schemes management — including collapsing the role under a single agency to boost transparency.

“It would be desirable to integrate all existing scholarship and bursary schemes under a single authority to provide one set of eligibility criteria applied across the board, thereby enhancing targeting and effectiveness in the use of sparse public funding,” the World Bank says.

It urges the Kenyan government to decide whether it wants to entrust the Commission for University Education (CUE) or Helb with this important responsibility.

Under one roof

“Merging all scholarship schemes under one roof should be accompanied by efficient and transparent management to ensure smooth operation and increased accountability,” the World Bank says, adding that one of the factors that exacerbated the #feesmustfall student movement in South Africa between 2015 and 2016 is that the financial aid agency, National Student Financial Aid Scheme (NSFAS), was plagued by poor management and disbursement.

Student protests led to damages of property worth more than $40 million and only ended after the South African government announced that there would be no tuition fee increases.

The protest were triggered by an announcement by the South African Higher Education ministry that there would be fee increases capped at eight percent for 2017; however, each institution was given the freedom to decide by how much their tuition would increase.

The World Bank said apart from a centralised administration of loans and bursaries, Kenya should also address the inequality in higher education funding by eliciting the parallel fee payment system.

“The most equitable and sustainable approach would be to eliminate the present parallel fee system and move instead to a Targeted Free Tuition (TFT) scheme, following the example of South Africa.

This would require shifting from a system of fee exemptions that benefit the most qualified students from an academic viewpoint to a system where the neediest students who qualify for higher education studies would not pay tuition fees,” it says.

South Africa is among countries which recently adopted a funding model where only low-income students are exempted from paying tuition fee, while those from middle-income households pay full fee with help from student loans.

The TFT model — also embraced in Chile, Italy, Ontario (Canada) and state of New York (US) — is what World Bank researchers are prescribing as a sustainable cure for Kenya’s erratic higher education funding.

“Helb policies for granting bursaries and loans ought to mirror this new approach. Priority should be given to extending bursaries and loans to needy students and providing loans to middle-class students.

Formidable challenges

This would help address the formidable challenges faced by the Board, as evidenced in a 2016 evaluation of Helb carried out by the World Bank,” the World Bank further says.

Helb is presently not able to meet demand for loans amid weak loan recovery mechanisms and increased competition for public funding.

The board in April threatened to list about 67,093 former university students with Credit Reference Bureaus (CRBs) over unpaid student loans estimated at Sh6.5 billion.

“Helb is facing unprecedented pressure due the anticipated increase in demand for loans which will accompany the “Tsunami” of students aspiring to enter the postsecondary education system from 2016,” the researchers wrote in the report.

“Each year the gap between the demand for funds and Helb resources is expected to increase dramatically … (and) further financing gaps are expected to develop in the absence of rectifying interventions.”

Bond issuance

Helb has for years been mulling over issuance of bonds to boost its cash flows with Mr Ekwe Ethuro, who chairs the board, projecting the initial Sh500 million could be floated in 2022, if approved by the Treasury.

“Many factors explain the relative success or failure of any student loan scheme, including design considerations relative to the interest rate and administrative costs, the strength of its leadership, the quality of management practices and systems, and the ability to react rapidly and flexibly whenever problems arise,” the report says.

“No matter what type of student loan system operates in a country, it is doomed unless its collection mechanism is designed and operates in an effective manner.

To further strengthen loan recovery, Helb could work on improving awareness among loan beneficiaries and their families, introduce a system of moral guarantors, and invest in reliable ICT mechanisms to track graduates.”

Helb presently largely uses employers and other agencies such as the Kenya Revenue Authority to trace student loan beneficiaries.