Nyeri Town Member of Parliament, Ngunjiri Wambugu, is at pains to explain the reason behind Parliament's rejection of the Higher Education Loans Board (HELB) bill proposing reduction of interest rates.
In a statement on Tuesday, August 31, Wambugu argued that the reduction of interest rates from the current four percent to the proposed three percent would not be sustainable for the board to finance future beneficiaries.
He noted that the current interest, which is charged per annum, is lower than the inflation rate which has ballooned to 5.41 percent.
"Unfortunately even the 4% interest rate is lower than the annual average inflation in Kenya which was at an average of 4.69 per cent in 2018, 5.2 per cent in 2019 and 5.41 per cent in 2020," stated the Legislator.
"This means that the actual value 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 HELB at the berg real danger of not being sustainable in the long run, to the detriment of future needy students," argued Wambugu.
He further noted that with the reduction, the board would find it difficult raising the money from third party entities.
"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 Ksh4.5 billion in 2019/2020."
"Consequently it is instrumental in HELB’s pursuit to create a national sustainable revolving fund from where future generations can borrow for tertiary education financing, with minimal exchequer support," he added.
His justification, however, did not go down well with Kenyans who argued that some individuals like Members of the County Assembly (MCAs) were given grants by the state.
"Scrap off the loan and make it a grant. Parliament should get serious in crafting policies that can create jobs to youth to enable them be able to pay loans. The monthly fine should be disbanded, it impoverishes youth. Kenyan MPs are against anything aimed at lifting youths out of poverty," argued Nick Yalla.
"MCAs and other elected leaders get numerous grants. Do the same to university students," suggested Thyraw Miano.
In the flopped proposal presented by Nominated MP Gideon Keter, the lawmaker sought to extend repayment grace period from one year to five years.
In his proposal, Keter was also seeking to have interest on the principal amount given to the youth as well as people with disabilities waived until they secure employment.
However, the National Assembly Committee on Education, chaired by Busia Woman Representative, dismissed the proposal, arguing that if implemented, the board would face challenges in financing higher education.
The team also noted that reviewing it downwards would undermine the board's existence and financial muscle.
"In the event that the interest rate is varied downwards, HELB's financial capacity to fund students will be grossly affected."
"This, therefore, requires the National Treasury to provide more budgetary allocations to HELB," stated a report from the committee.
