The Higher Education Loans Board (Helb) intends to issue a bond to borrow Sh22 billion to fund laptop purchases for university students.
The number of government-sponsored students in public universities has increased rapidly in recent years as the entry grade to public universities has been reduced to C+, outpacing Helb’s State funding.
“Initially we estimated this to be Sh5.5 billion. However, looking at the application of these funds, which is to finance students to acquire laptop loans for purposes of e-learning … we estimate this now at Sh22 billion,” Charles Ringera, CEO of Helb, stated.
According to Helb, the Treasury and the Capital Markets Authority (CMA) have approved the bond’s issuance plan. The agency, which is looking for a transaction adviser to help with the bond’s issuance, stated that it has obtained a sovereign guarantee from the government.
“The current university enrolment is at 700,000. Only 20 percent of these students have laptops, leaving over 560,000 in need of laptops. For Sh45,000 for a reasonable laptop, then you can now see the actual demand – but we could start this progressively by issuing these in tranche notes.”
The bonds will be issued for seven years. Pension funds and social impact investors are among the investors targeted. A special purpose vehicle will be established to manage a portion of Helb’s loans and receivables, with inflows used to repay bond interest.
The agency claims to have Sh110 billion in current assets that can be used to back the bond. Helb is currently funded primarily through Treasury capitation and interest from student loans.
Helb estimates that its funding gap in the current fiscal year is Sh3 billion, which is attributed to over 75,000 students in universities and technical and vocational education and training (TVET) colleges.
The cash-strapped Helb announced earlier this year that it had run out of funds, preparing university freshmen for a difficult start to their studies. Helb had previously stated that freshmen who enrolled in public universities in September would have to wait until the Treasury offered Sh3 billion in initial disbursement.
The majority of loan applicants are from low-income families and require financial assistance from Helb to pay for their tuition and living expenses.
Most universities require full payment of a semester’s fees before admitting students, and delays in disbursement may force some freshmen to postpone their studies.
Aside from traditional resource mobilization, Helb has been investigating alternative strategies such as attracting social investors and raising debt both locally and internationally.
Loan defaulters have weakened the agency’s ability to support new and continuing students, causing allocations to be reduced. In the current fiscal year, the average loan allocation is Sh37,000 per student per year, down from Sh45,000 the previous year.
Based on their financial situation, the agency provides funding to needy students ranging from Sh35,000 to Sh60,000 per year.
The rising number of defaulters is linked to the country’s high unemployment rate and beneficiaries’ migration to the diaspora in search of greener pastures.
The population grew 23.2 percent to 324,182 in the fiscal year ending June, according to data from the Universities Funding Board (UFB), the State agency that guides the allocation of cash for students.
The Treasury’s annual allocation to Helb has increased from Sh7.5 billion in 2015 to Sh15.2 billion in 2018, but it has not kept pace with the growing student population.
In 2013, the agency began a drive to raise external resources as it develops new financing models, including corporate foundations and philanthropists in the race to become an education bank.
Funds raised from alternative sources reached a new high of Sh1.64 billion in the fiscal year ended June 2021, up from a low of Sh189.9 million in the previous year.