Nairobi gets tough on graduate loan arrears

October 8, 1999

Kenya's higher education loans board has asked employers to disclose the names of graduate employees so that it can impose a higher interest rate on outstanding loans.

More than 60,000 graduates owe nine billion shillings (Pounds 71 million) in unpaid university loans. The board has written to employers asking for the names of graduate employees who attended public universities between 1974 and 1993.

The decision to recover the loans was reached in parliament when the government said it had no money to give loans to students.

The board's statistics identify lawyers as the major defaulters, although demand letters are frequently sent to them. They include lawyers, magistrates and even some judges.

Several government ministers, members of parliament and senior government officials are also among the defaulters. Secondary school teachers, lecturers, journalists and doctors are best at repayments.

Chacha Nyaigotti-Chacha, board chief executive, said defaulters will have to pay commercial interest rates of 20 per cent.

This is quite a big increase on the 2 per cent standard repayment rate.

"This is not punitive, but there is no other way the board would cover the costs of tracing people who are not willing to pay up," Mr Chacha said.

The board has found it difficult to raise the money to give loans to 40,000 students at the five public universities.

The board has also been under pressure from 2,000 students in private universities who wanted to be included in the scheme, which was initially set up to benefit students at the public universities.

In the last financial year, the government allocated 600 million shillings, while the board actually needed 900 million shillings to cover for most applicants including those from private universities.

Currently 25,000 graduates are repaying the loans, but only 5,000 have paid them off. Each student is entitled to a maximum of 50,000 shillings a year.

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