World Bank shines torch on Helb cash and high expenses

The Higher Education Loans Board (Helb) is spending more time and money on administrative costs at the expense of issuing loans to students joining universities, a report by the World Bank has revealed.

The Bretton Woods institution wants the board to reduce administrative costs by outsourcing recovery operations and through improved efficiency of its day-to-day operations.

The report titled “Expanding tertiary education for well-paid jobs-competitiveness and shared prosperity in Kenya”, was released last month and handed over to Education Cabinet Secretary Fred Matiang’i for action.

For instance, in Helb’s 2012 annual report, operational expenses accounted for approximately 22 per cent of total expenses (Sh143 million operational costs out of Sh636 million total expenses).

This financial year, with a budgetary allocation of Sh9.1 billion from the National Treasury, and a total budget of Sh10 billion, about Sh1 billion has been set aside as total expenses.

Recently, Helb announced that more than 86,000 government-sponsored students who had joined universities in August to September would wait longer for loans.

This was after it moved the deadline for receiving applications to October 21, from September 30, to accommodate the over 40,000 learners who were yet to submit their forms.

The World Bank report also says universities should play a critical role in promoting financial literacy and in helping to shoulder the burden of loans.

“Universities should take responsibility for students’ loan payments. The government should consider requiring universities to take responsibility for students who drop out and for under-performing students who have loans,” recommends the report.

It adds: “The financial risk of students dropping out is primarily an academic risk, which universities should mitigate against through rigorous admission criteria and provision of high quality teaching, including remedial programmes.”

The report was done by former University of Nairobi vice-chancellor Crispus Kiamba, Andreas Blom, Reehana Raza, Himdat Bayuduf and Miriam Adil — all from the World Bank.

It says tertiary institutions should guarantee a percentage of the value of loans, since low dropout and default rates mean that the new revenues would exceed the costs.

The report also proposes an overhaul of loan disbursement and recovery mechanism so that it targets the poor and those unable to pay tuition fees. It adds that not everyone should feel entitled to the loans.

Helb is mandated with the task of providing loans and grants to students in public and private universities, as well as those enrolled in tertiary institutions in Kenya and East Africa.

The report projects that the number of loan applicants will grow by 30,000 to 35,000 each year between 2014 and 2022.

It adds that Helb should establish a system to assess the veracity of financial information provided by loan applicants. “Data suggests that loan applicants under-report their family income to boost their chances of acquiring loans. At present, Helb has no credible verification mechanism for this,” it states.

The report notes that the loans do not vary significantly by household income, while disbursement mechanisms should be improved to prioritise support to low-income students.

The World Bank says Helb would benefit greatly from risk-sharing mechanisms with beneficiary institutions and families.

“Private institutions accrue substantial benefits from financial resources derived from Helb-supported students, but these institutions do not contribute to the scheme,” adds the World Bank.

It notes that families, too, reduce their out-of-pocket expenditure through access to student loans.

Other strategies proposed to improve recovery include more frequent contact with students and borrowers, their families and the education institutions.

“Evidence suggests that the default characteristics of beneficiaries are insufficiently analysed to identify the key risk factors. Improved data collection and analysis would enable Helb and tertiary institutions to initiate preventive action,” adds the report.

The determination of loans for each student is premised on a mean testing instrument which evaluates each applicant against a set of criteria to assess relative need and the government’s priority.

On employability of graduates, the report notes that Kenyan companies are facing severe difficulties in recruiting workers with applicable skills and knowledge.

It calls for introduction of new programmes linked to market opportunities and shifting demands by the private sector.