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State cash top-up to Helb triples as loans default rises sharply

Higher Education Loans Board
Students and parents return loan application forms at the Higher Education Loans Board offices in Nairobi. FILE PHOTO | NMG 

The government’s cash top-ups to the Higher Education Loan Board (Helb) has nearly tripled in the last five years, new data shows, an indication of the massive cash crunch facing the fund, which thousands of needy students highly rely on for their university education.

The State’s capitation on education loans has jumped by a whopping 173 per cent in the past five years to Sh6.2 billion in financial year 2016/17, the Kenya National Bureau of Statistics (KNBS) says.

This coincided with a steady growth of student enrolment in universities, which has increased demand for funds from the Helb.

As of the 2017/18 financial year, there were some 520,893 students enrolled in the various universities compared to 251,196 in 2012/13.

The total student loans awarded, on the other hand, increased from Sh5.1 billion in 2012/13 to Sh9.5 billion in 2016/17.

But in what is causing sleepless nights for both the government and Helb, debt repayment by former beneficiaries remains poor — forcing the State to chip in through higher loan capitation. Data shows that until the 2013/14 fiscal year, total loan repayments to the Helb were higher than government capitations but this has since changed with the State now having to pump in more cash to cover for a widening hole caused by a streak of bad debt by past beneficiaries.

The KNBS data shows that of the Sh35.5billion loans awarded to students by the Helb between the fiscal year 2012/13 and 2016/17. Repayments realised over the same period amounted to Sh17.9 billion.

The Helb in January disclosed that it was is reeling from Sh6.6 billion non-performing loans advanced to 64,000 former university students in what could indicate the inability to repay.

The Treasury has in the past accused Higher Education ministry officials of failing to develop long-term plans for disbursement of student loans, causing incessant funding shortfalls that are hurting learners from poor backgrounds.

A dip in loan recoveries due to default means some poor students could miss out on this critical funding, which pays for tuition and accommodation.

In an indication of the growing desperation by the State to end the cash crunch facing the Helb, Education secretary Amina Mohammed last week said the government would use police to crack down on defaulters.

“We are also going to partner with our law enforcement agencies to track down those holding jobs and yet are reluctant to stand up to be counted as responsible and patriotic citizens who honour their debts,” she said during the launch of the Helb’s 2019-2023 strategic plan last week.

The minister’s threats, however, drew rage from the public with social media users urging the government to address the high levels of unemployment.

Unemployment and job losses in the economy have seen beneficiaries of student loans either unable to pay or stop repaying midway.

In the past, the Helb said it had recorded a surge in notifications from employers indicating retrenchments of their workers who benefited from its cash.

More than 50 per cent of graduates churned out of the local universities yearly do not get jobs, another significant number are underemployed or underpaid. Kenya’s unemployment rate among youth aged between 15-24 is 26.2 per cent, based on the latest data by the World Bank.

Former World Bank chief economist for Kenya Apurva Sanghi has postulated that Kenya’s high unemployment rate is mainly due to the fact that Kenya’s ability to create new jobs has lagged behind the population growth, thinning formal opportunities.

The KNBS data shows that jobs in the informal sector constitute of 83.4 per cent of the total employment created in 2017 when only 110,000 new jobs were created in the formal sector.

These new jobs included the extra personnel engaged in the public sector to serve in the Independent Electoral and Boundaries Commission and recruitment in the essential services, such as health, education and security services.

The Helb last week said it plans to float a Sh500 million bond to help stabilise its operations even as it struggled to recover billions of shillings from defaulting past loanees.

“We are hoping that in the next three years we should be able to have the first bond, but it is subject to other players like the Treasury” board chairman Ekwee Ethuro told the Business Daily last week.

“It will be floated the same way we are doing with infrastructural bonds.”