KENYA: Loan defaulters to be blacklisted

Kenya's Higher Education Loans Board, HELB, has entered into a data sharing partnership with Metropol East Africa Limited in a bid to tackle the problem of student loan defaulters. Metropol will collate information on the credit histories of beneficiaries of HELB loans and pass the information on to banks. Students who fail to repay loans on completing their degrees could be barred from accessing loans from banks and other credit facilities.

The agreement signed this month by HELB Chief Executive Officer Benjamin Cheboi and Metropol East Africa Limited Managing Director, Samuel Omukoko, will rely on Metropol's recently introduced product My M-Score ©, an innovative tool that can be used by lenders to rate a potential borrower.

Cheboi decried the high number of students who had not repaid loans, saying HELB was entering into partnerships with credit bureaus in an effort to initiate and strengthen new modes of loan recovery.

According to Cheboi, of 198,265 university students awarded loans, only 35,355 had completed their loan repayments. Some 110,000 are still repaying while about 60,000 others are currently not servicing their loans.

"We know many of them have got jobs. A large number are in the informal sector, but I want to remind them that the contract between them and us does not say they pay the loan upon employment. It states that the loan must be paid when it matures," added Cheboi.

Addressing journalists at the Stanley Hotel in Nairobi, the HELB boss disclosed that during the financial year 2007-2008 the board awarded loans worth 2.2 billion shillings (US$29 million) and by June of this year it would disburse another tranche of 2.7 billion shillings.

He said previously the board had given loans to 40,000 students annually but the scenario had since changed, with the number of applicants hitting an average of 70,000 owing to the high number of students enrolled in universities.

Kenya has seven public universities that admit 17,000 students yearly through the Joint Admissions Board, or JAB, and a larger number through self-sponsored programmes popularly known as parallel degree programme.

In addition the government has in recent years expanded access to university education by creating 11 university colleges. There are also 11 chartered private universities which admit about 10,000 students annually, with thousands more students fighting for spaces at seven other universities with Letters of Interim Authority.

"It is anticipated that by the year 2015 there will be almost 450,000 students in public universities. This will put great pressure on families and government to finance their education," noted Cheboi.

Metropol's Omukoko said his firm would obtain information from HELB and disseminate it to financial institutions, which would use the data to determine whether to give former university students loans or deny them based on their credit history.

My M-Score © sought to unlock the potential of an untapped segment of borrowers by mining non-traditional credit history data that might not be in the realm of the lender, Omukoko said.

In July 1995 the Kenyan government, through an act of Parliament, established HELB to administer the Student Loans Scheme. The Board is also empowered to recover outstanding loans given to former students by the government and to establish a revolving fund from which funds can be drawn to lend to needy Kenyan students pursuing higher education. The establishment of a revolving fund was also expected to ease pressure on the exchequer in financing education, which currently stands at 40% of the annual national budget.