IS THE SCHEME FEASIBLE IN UGANDA?
Oct 20, 2009
<b>TUITION LOANS</b><br><br>The Uganda Bureau of Statistics (UBOS) says more than 100 poor people live per square kilometre in the northern region, Busoga and Teso. But, with such high poverty levels, the five public universities recently announced a 40
TUITION LOANS
The Government plans to give loans to university students who cannot afford tuition. The five public universities in Uganda recently announced a 40% tuition increment
By Francis Kagolo
The Uganda Bureau of Statistics (UBOS) says more than 100 poor people live per square kilometre in the northern region, Busoga and Teso. But, with such high poverty levels, the five public universities recently announced a 40% increment in tuition.
As the years go by, accessing university education becomes more difficult for the average Ugandan. Hence, the Government, in an effort to make university education affordable, is planning to roll out the Student Tuition Loan Scheme next financial year.
Who is eligible for a loan?
Documents obtained from the education ministry show that plans to introduce the loan programme in Uganda started in 1990.
Initially, the plan was to give loans only to Government-sponsored students to meet their living costs, but the consultants, whom the education ministry hired, recommended that loans with subsidised interest rates be given to the best academic performers of the self-supporting students.
The programme will first be funded by the Government, but later, partners like the World Bank will be asked to support it.
The consultants recommended a one-year grace period and gave the Government a list among penalties to the loan defaulters. For example, in case a graduate defaults, the Government can attach his salary/wage or passport.
The idea behind student tuition loan schemes is to ensure private contributions to the cost of higher education, increase access and equity as well as improve efficiency of higher education.
Prof. A.B.K. Kasozi, the executive director of the National Council for Higher Education and Namirembe Bitamazire, the education minister, among others fronting for the loan programme, argue that the scheme will help poor students get university education and boost the country’s human resource capacity. The Government hopes this will accelerate economic development.
According to documents from the ministry, the consultants recommended that the loans have a relatively generous cut-off, covering 75% to 80% of successful high school graduates who have been admitted to any university in the country per year.
With about 100,000 private students currently in universities, this means the Government would need over sh200b to lend to 80% of them each year, taking the average cost for a course to about sh1.2m per semester.
A number of African countries including neighbouring Kenya, also operate student loan schemes. But Kenya’s programme has suffered setbacks of poor administration, high costs and high default rates, as Dr. Wycliffe Otieno, a Nairobi-based scholar, puts it in a book, Student Loans in Kenya: Past Experiences, Current Hurdles, and Opportunities for the Future.
Experts say efficacy of any loan scheme depends mainly on the recovery ratio. Thus, renowned education consultant Fagil Mandy observes that a student loan scheme would serve well in an economy where graduates find no challenges getting jobs; but it is likely to suffer from high default where unemployment rates are highest, and Uganda is not exclusive.
Otieno says in 1995, the Kenyan government disbursed Ksh630m (close to sh17b) as loans to 6,316 first-year students. But by 2004, it had recovered only Ksh6.420m (about sh162m) monthly from 3,000 students, the majority of whom were teachers.
In the period, the country recorded default rates of over 80%. Experts concluded the loans were more costly to administer than grants.
Kenya’s horrible experience, thus, raises uncertainty over the feasibility of the scheme in a country like Uganda where unemployment is high; with only 113,000 of the 400,000 graduates entering the labour market each year getting employed, according to UBOS statistics.
Unless the Government guarantees that every loan beneficiary will get employment immediately after graduating, Mandy says the scheme is bound to fail. “This scheme requires that the borrowers pay back the money to make it continuous. But it is hard to guarantee that someone will get a job and pay back yet there are many graduates on the streets of Kampala,†he observed.
Finance experts also warn that in an economy where getting a job is highly unpredictable, it is risky for a student to take a loan for tuition.
“Education is supposed to be an investment, where you put money and anticipate getting it back plus profits in the shortest time possible,†says Frederick Ndiwalana, a finance development consultant.
“But some of our graduates have ended up doing jobs for P.7 and S.4 dropouts, like working in markets and bars. If one’s chances to get money out of his degree are minimal, he should not take a tuition loan,†Ndiwalana advises.
Bankers Education Vision contacted added that most Ugandans are reluctant to repay loans. The bankers say this might affect the scheme too.
“The student loan scheme requires that graduates service their loans promptly so that more loans can be made with the proceeds. However, not many Ugandans have developed that strong spirit of paying back loans without being coerced,†says a banker.
Mandy says Uganda also lacks a comprehensive human resource policy and cannot determine how many professionals are required in each field.
As a result, he observes, the Government might end up dishing out loans to students pursuing courses that are irrelevant to market needs and thus, have minimal contribution to the country’s economic development.
Meanwhile, away from the Government’s delayed programme, some private universities have been smart enough to introduce loan schemes for their students, with Kampala International University (KIU) taking the lead.
However, KIU’s loan scheme is extended only to credit worthy working students and parents who need some assistance to cover tuition for their children. The scheme is run exclusively by Orient Bank, with a 24% interest rate and no grace period, but it requires collateral. Orient Bank chief Maxwell Ibeanusi says repayments would be made in monthly instalments.
But analysts have argued that with this type of loan, the idea is not to help the poor access university education, but to ease studies for the wealthier ones. In other instances, a student or his parent may also negotiate a tuition loan with his bank.
Both frameworks, however, also have their own shortcomings. Mandy says many parents are likely to lose their property to banks for failure to repay tuition loans.
“Some blind parents may borrow money because they want their students to get degrees. It is unwise to take a tuition loan from a commercial bank,†he says.
Ndiwalana says tuition loans from commercial banks are suitable for employed students who want to upgrade because these can afford to pay.
They both advise that it is better for jobless students to begin on a diploma level, which is cheaper and upgrade in future, instead of taking loans.
The Government plans to give loans to university students who cannot afford tuition. The five public universities in Uganda recently announced a 40% tuition increment
By Francis Kagolo
The Uganda Bureau of Statistics (UBOS) says more than 100 poor people live per square kilometre in the northern region, Busoga and Teso. But, with such high poverty levels, the five public universities recently announced a 40% increment in tuition.
As the years go by, accessing university education becomes more difficult for the average Ugandan. Hence, the Government, in an effort to make university education affordable, is planning to roll out the Student Tuition Loan Scheme next financial year.
Who is eligible for a loan?
Documents obtained from the education ministry show that plans to introduce the loan programme in Uganda started in 1990.
Initially, the plan was to give loans only to Government-sponsored students to meet their living costs, but the consultants, whom the education ministry hired, recommended that loans with subsidised interest rates be given to the best academic performers of the self-supporting students.
The programme will first be funded by the Government, but later, partners like the World Bank will be asked to support it.
The consultants recommended a one-year grace period and gave the Government a list among penalties to the loan defaulters. For example, in case a graduate defaults, the Government can attach his salary/wage or passport.
The idea behind student tuition loan schemes is to ensure private contributions to the cost of higher education, increase access and equity as well as improve efficiency of higher education.
Prof. A.B.K. Kasozi, the executive director of the National Council for Higher Education and Namirembe Bitamazire, the education minister, among others fronting for the loan programme, argue that the scheme will help poor students get university education and boost the country’s human resource capacity. The Government hopes this will accelerate economic development.
According to documents from the ministry, the consultants recommended that the loans have a relatively generous cut-off, covering 75% to 80% of successful high school graduates who have been admitted to any university in the country per year.
With about 100,000 private students currently in universities, this means the Government would need over sh200b to lend to 80% of them each year, taking the average cost for a course to about sh1.2m per semester.
A number of African countries including neighbouring Kenya, also operate student loan schemes. But Kenya’s programme has suffered setbacks of poor administration, high costs and high default rates, as Dr. Wycliffe Otieno, a Nairobi-based scholar, puts it in a book, Student Loans in Kenya: Past Experiences, Current Hurdles, and Opportunities for the Future.
Experts say efficacy of any loan scheme depends mainly on the recovery ratio. Thus, renowned education consultant Fagil Mandy observes that a student loan scheme would serve well in an economy where graduates find no challenges getting jobs; but it is likely to suffer from high default where unemployment rates are highest, and Uganda is not exclusive.
Otieno says in 1995, the Kenyan government disbursed Ksh630m (close to sh17b) as loans to 6,316 first-year students. But by 2004, it had recovered only Ksh6.420m (about sh162m) monthly from 3,000 students, the majority of whom were teachers.
In the period, the country recorded default rates of over 80%. Experts concluded the loans were more costly to administer than grants.
Kenya’s horrible experience, thus, raises uncertainty over the feasibility of the scheme in a country like Uganda where unemployment is high; with only 113,000 of the 400,000 graduates entering the labour market each year getting employed, according to UBOS statistics.
Unless the Government guarantees that every loan beneficiary will get employment immediately after graduating, Mandy says the scheme is bound to fail. “This scheme requires that the borrowers pay back the money to make it continuous. But it is hard to guarantee that someone will get a job and pay back yet there are many graduates on the streets of Kampala,†he observed.
Finance experts also warn that in an economy where getting a job is highly unpredictable, it is risky for a student to take a loan for tuition.
“Education is supposed to be an investment, where you put money and anticipate getting it back plus profits in the shortest time possible,†says Frederick Ndiwalana, a finance development consultant.
“But some of our graduates have ended up doing jobs for P.7 and S.4 dropouts, like working in markets and bars. If one’s chances to get money out of his degree are minimal, he should not take a tuition loan,†Ndiwalana advises.
Bankers Education Vision contacted added that most Ugandans are reluctant to repay loans. The bankers say this might affect the scheme too.
“The student loan scheme requires that graduates service their loans promptly so that more loans can be made with the proceeds. However, not many Ugandans have developed that strong spirit of paying back loans without being coerced,†says a banker.
Mandy says Uganda also lacks a comprehensive human resource policy and cannot determine how many professionals are required in each field.
As a result, he observes, the Government might end up dishing out loans to students pursuing courses that are irrelevant to market needs and thus, have minimal contribution to the country’s economic development.
Meanwhile, away from the Government’s delayed programme, some private universities have been smart enough to introduce loan schemes for their students, with Kampala International University (KIU) taking the lead.
However, KIU’s loan scheme is extended only to credit worthy working students and parents who need some assistance to cover tuition for their children. The scheme is run exclusively by Orient Bank, with a 24% interest rate and no grace period, but it requires collateral. Orient Bank chief Maxwell Ibeanusi says repayments would be made in monthly instalments.
But analysts have argued that with this type of loan, the idea is not to help the poor access university education, but to ease studies for the wealthier ones. In other instances, a student or his parent may also negotiate a tuition loan with his bank.
Both frameworks, however, also have their own shortcomings. Mandy says many parents are likely to lose their property to banks for failure to repay tuition loans.
“Some blind parents may borrow money because they want their students to get degrees. It is unwise to take a tuition loan from a commercial bank,†he says.
Ndiwalana says tuition loans from commercial banks are suitable for employed students who want to upgrade because these can afford to pay.
They both advise that it is better for jobless students to begin on a diploma level, which is cheaper and upgrade in future, instead of taking loans.