A Student Loan Scheme in Uganda: A PRESS RELEASE Dated: September 22, 2003

In his 2001 Election manifesto, President Museveni promised to implement an Educational Loan Scheme, today, ten years after, nothing of the type is in place!
Attention: The Hon. Minister of State for Higher Education; Ministry of Education & Sports
The 2003/04 academic year for Universities and tertiary institutions is starting late September 2003 without an Educational Loan Scheme in place. This state of affairs is very sad on the part of Makerere University Private Students’ Parents’ Association (MUPRISPA) Ltd. The effort to see the Educational Loan Scheme was started by the association in July 2001. The association (MUPRISPA) went at length to appeal to His Excellency the President to have the scheme in place. This was followed by an appeal to the Hon. Minister of Finance to incorporate a provision for the Educational loan scheme in his 2002/03 budget. Fortunately, the Hon. Minister incorporated shs 400m for studies to see the scheme in place. The association went ahead to write “A comprehensive feasible and sustainable educational loan scheme in Uganda,” and also, “Identifying clientele for the educational loan scheme and loan recovery measures.” All this was done to see that the educational loan scheme is implemented as soon as possible given the suffering of the parents/benefactors to meet the tuition fees lump some and also beat the University deadlines. Unfortunately, the scheme seems to be a long way from implementation with a lot of uncertainty.
In my letter dated July 9, 2001 to His Excellency the President of Uganda, “The students’ loan scheme at Makerere University and parents involvement,” I on behalf of Makerere University Private Students’ Parents’ Association wrote: “The parents are happy to learn that in your 2001 Election Manifesto among other things you clearly stated thus, “My Government will establish an Educational Loan Scheme to increase access to higher education.” Given this position, the parents have endeavoured to come up with “The feasibility of a Student Loan Scheme attached; this according to the parents as a starting point in helping Government to see to the implementation of your manifesto.”
“The feasibility has a background quoting various authorities and their emphasis of the necessity of the said scheme. The report also shows how the private scheme has made a substantial contribution to sustain the University, and it is no surprise that senior lecturers can earn over the equivalent of US $1,300 plus the improved infrastructure at the University to mention but a few.”
“However, it is also realized the scheme bags near to U shs 16bn to date from parents majority of whom are paying a great cost to see the finance of their children’s education. It is bad news to learn of the rate at which parents are parting with value, like land, houses to finance this education! In essence, the parents are being impoverished a situation that is likely to endanger the future of the families.”
Given the situation where many students are failing to raise tuition and others dropping off as they fail to raise the funds, it has become absolutely important that Government takes the Student Loan Scheme as a priority that should be implemented as soon as possible.
Much as our association has all along been interested in the development of the loan scheme, it is not until the story: “Shs 6bn loan for students,” that appeared in the Sunrise news paper of September 5-12, 2003 that we may be in for a shock when the final students’ loan scheme comes to reality.
The scheme may flop miserably given the trends seen so far. Among these, the Uganda Educational Loan Scheme MUST be original given Uganda’s circumstances and not a duplication of what goes on elsewhere with Student loan schemes. It is against this background that MUPRISPA does not approve of students being borrowers irrespective of the courses they are taking in the higher institutions of learning. What MUPRISPA identified was that parents/benefactors have a cash flow problem given the amount of money most of them earn as salary and the competing needs to which they spend this money on. So, it remains in the Uganda focus that the scheme should actually bail out the parent/benefactor who foots the bill now; reasons being that the chances of students meeting repayment after is uncertain given the unemployment levels in the economy. Second, that students previously helped with post dated cheques by lecturers as guarantors had greatly absconded and the liability had remained to the lecturers to pay back! Third, that many Ugandans had shown that they take funds from Government as if manna from Government, hence reluctant to pay back. Fourth, that a situation where the loan scheme would be managed as a micro finance undertaking stood higher chances of sustainability, and also more acceptable to prospect funding organizations and less likely to be abused.
The other trend observed is the categorization of some courses as more worthy beneficiaries of the loan scheme, hence chances of ruling out students of Humanities to take loans. This position is unacceptable as it shall deny Career Development for students who love to pursue courses in Humanities. And, it is equally true that as Uganda progresses it will need all these categories of manpower from professors to those who may end up as self employed.
It has also been noted that the scheme may award loans that could go up to shs 14m. This is equally unacceptable. Loans should strictly reflect the tuition fees payable and basic course projects and tour needs by student beneficiaries.
If Government goes ahead to grant loans to students payable after they have graduated, it will be most unfortunate. The scheme will not only be unsustainable from the word go, but it will also register high default rates and suicide by some beneficiaries on failing to meet repayment may not be ruled out.
The Sunrise newspaper talked about shs 6bn for the loan scheme. This is a drop in the ocean. Our proposal is for Government to procure at least US $40m World Bank (IDA) loan and put this in the hands of the Loan Secretariat and shs 6bn to be the yearly addition to the scheme from the Government budget to ensure sustainability as the repayments are made to the creditor.
The Proposals briefly are:
1) Repayment period to be twice the number of years the student’s course duration in the higher institution of learning;
2) Monthly equal installments repayment for the duration, or as may be agreed depending on the parent/beneficiary income expectation;
3) Membership subscription fee not less that shs 100,000 payable on enrolment to the scheme;
4) 5% Commitment fee on each semester fees payable to the Loan Secretariat by each beneficiary;
5) No other interest payable;
6) At least one guarantor to the parent/benefactor and the student being the 3rd party;
7) Have public servants’ children automatically qualifying to join the scheme (mostly those in lower salary category levels);
8) Ensure that each loan beneficiary open up a Standing Order with his bankers to ensure easy recovery of the funds;
9) Terminate the loan in case 3 consecutive installments are not paid;
10) Have diploma holders/Masters and Ph D students out of the scheme;
11) Put a law in place to ensure that at no moment in time does Government encroach on the Loan Scheme funds;
12) Give all applicants a chance to apply and screen them according to set procedures;
13) Ensure that the Loan Secretariat is run on own generated funds from membership fee and the 5% Commitment fee;
14) Loans should not consider students opting for studies outside Uganda for the start;
15) Vet applicants using Schools attended, Occupation of parent/beneficiary (ability to pay University fees), size of families and NOT LC infrastructure which has proven corrupt in many instances;

William Kituuka.