Why MPS Rejected Bill To lower HELB Interest Rates

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Kenyan MPs have rejected a bill to reduce the interest charged on HELB loans.According to Ngunjiri Wambugu,their reasons for the rejection are:

1% REDUCTION FROM 4% TO 3% WOULD AFFECT ABILITY TO FUND FUTURE NEEDY STUDENTS

The current undergraduate loans are charged interest at a rate of #4% per annum. The proposal was to reduce it by 1% to 3%.

Unfortunately even the 4% interest rate is lower than the annual average inflation in Kenya which was at an average of 4.69 % in 2018, 5,2 % in 2019 and 5.41 % in 2020.

This means that the #actualvalue of the amounts disbursed is eroded each year since the annual interest rate charged is lower than the inflation rate. Economically, the resultant real value of monies disbursed is therefore reducing with time. This puts HELP at the berg real danger of not being sustainable in the long run, to the detriment of future needy students.

The 1% would also adversely affect resource mobilization/AIA for the Higher Education Loans Board as a revolving fund, and consequently its financial capacity to fund students in university and tertiary institutions now and in #future.

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1% REDUCTION FROM 4% TO 3% WOULD AFFECT ABILITY OF HELB TO ATTRACT FUNDING FROM 3rd PARTY INSTITUTIONS

HELB Loan recovery has been a major component of resource mobilization and Appropriation-In-Aid (AIA) for HELB to sustain the revolving fund.

The recoveries have immensely contributed to the annual students funding budget reaching a high of Kshs. 4.5 B in 2019/2020.

Consequently it is instrumental in HELB’s pursuit to create a national sustainable revolving fund from where #futuregenerations can borrow for tertiary education financing, with minimal exchequer support.

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REDEFINING THE TERM ‘YOUTH’ UNNECESSARY

The proposed amendment to the definition of the term “disability” was not necessary because the reference law with regards to persons with disabilities (PWDs) is the Persons with Disability Act, 2003 which gives the definition to mean a “physical, sensory, mental or other impairment, including any visual hearing, learning or physical incapability, which impacts adversely on social, economic or environmental participation”.

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REDEFINING THE TERM ‘PERSONS LIVING WITH DISABILITY’ UNNECESSARY

The proposed amendment to the definition of the term “youth” was not necessary because the definition of the term youth is provided in Article 260 of the Constitution which defines “youth” as the collectivity of all individuals in the Republic who— (a) have attained the age of eighteen years; but (b) have not attained the age of thirty-five years. This should be adopted as the principal definition of the term “youth”.

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WOULD HAVE LEFT HELB INTEREST RATE DETERMINATION TO 3rd PARTIES.

The bill was not clear on whom the power to set interest on HELB loans would be vested, and how it will be exercised. This would leave applicants subject to interest rate approval from third parties which creates a risk of reducing HELB’s revenue in the event that interest rate is varied downwards.

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NB;

#BBI proposed a #taxholiday. This would not have affected the sustainability of the fund in the long run because the taxes would still be owed, and they WILL be paid ultimately. This would have allowed the fund to run with the debt as an asset, even borrow on it. Finally this would have allowed the student to look for a job confidently without ‘hiding’ their HELB status. We will #revisit.