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Economy

Auditor-General says Helb unable to recover Sh24bn

University loan applicants being served at the Helb offices in Nairobi. PHOTO | FILE |  NATION MEDIA GROUP
University loan applicants being served at the Helb offices in Nairobi. PHOTO | FILE | NATION MEDIA GROUP 

The Higher Education Loans Board (Helb) may be headed for a deeper funding crisis caused by the failure of past beneficiaries to service their loans.

Auditor-General Edward Ouko says the agency is unlikely to recover Sh24.6 billion from past beneficiaries, weakening its ability to support university freshmen and continuing students.

“It has not been possible to ascertain the accuracy and recoverability of matured loans amounting to Sh24.6 billion as at June 2015,” Mr Ouko said in his report for the fiscal year ended June.

Helb has struggled to meet rising financial needs of students, especially those joining universities for their first year of study, due to a funding shortfall that has continued to grow in the past five years.

Most university students come from poor backgrounds and require financial assistance to pay tuition fees and for their upkeep.

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Last week, the Treasury said Sh1.5 billion had been made available to Helb through the supplementary budget in addition to the Sh7.5 billion that was allocated to the agency in the June budget.

Helb has in the past sought to downplay the Auditor-General’s concerns insisting that not all matured loans must be recovered in one year.

“Just because the loans have matured does not mean they should be recovered in total in one year but rather over a 10-year period,” Helb’s chief executive, Charles Ringera, said in an earlier interview.

Mr Ouko says the pile of non-matured student loans stood at Sh17.6 billion at the end of the fiscal year in June last year.

A sharp rise in the enrolment of students in public universities has continued to stretch the loans agency’s capacity to assist the large pool of needy applicants.

The number of students enrolled in universities grew 22.8 per cent last year, buoyed by the approval of new degree courses and the setting up of fresh campuses countrywide.

Public universities accounted for 81.8 per cent of the student population with 276,349 learners, signalling a looming build-up of pressure on the jobs market. About 40,000 students graduate from Kenyan universities every year.

The high enrolment rate is also exerting pressure on university teaching staff and facilities at a time when the institutions are struggling to raise cash for upgrade.

The loans agency in January cut the highest allocation per student to Sh50,000 from Sh60,000 per academic year for freshmen who joined university last year after a four-month delay.

The under-funding has in recent years prompted protests from students.

Helb has in the past opened amnesty windows for defaulters to pay their loans free of accrued fines of Sh5,000 per month.

The agency is also in talks with the Federation of Kenya Employers (FKE) to develop guidelines that would require employers to screen new employees for student loan status before hiring them.

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

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

Besides, the students’ financier recently disclosed plans to run a lottery and offer education saving plans by the end of this year as it moves to cut its dependency on taxpayer funds.

Profits from the lottery, to be run in the form of raffles, will be used to finance the agency’s loan book, which currently faces a massive funding gap.

Mr Ringera, the Helb chief executive, said plans are also underway to offer child education plans as a new strategy to mobilise long-term funds.

Under the proposed plan, parents can save as low as Sh1,000 every month towards meeting the future cost of their children’s education.

In his audit, Mr Ouko also questioned the accuracy of the value of property, plant and equipment balance of Sh122.3 million, saying it includes a parcel of land — LR No.209/13515 — measuring 0.6 hectares situated in Nairobi’s Upper Hill area.

“Although the ownership documents indicate that the land belongs to the board, a discrepancy exists between the deed plan at the Ministry of Land, Housing and Urban Development and the actual position on the ground,” says the audit report.

Mr Ouko says the Kenya Railways Corporation has made a claim to the plot in question arguing that it was illegally excised from the corporation’s land.

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