What to consider prior to implementation of a Student Loan Scheme in Uganda:
1. The sustainability of the scheme
2. Who should be the borrowers
3. Whether partial or full tuition loans
4. The number of beneficiaries
5. Identity of the scheme
6. Employment prospects of students on graduation
7. Experiences of other countries
8. How parents can contribute to the scheme prior to students joining the scheme
9. Politics interfering in sustainability
10. History of prospect borrowers
11. Change of curriculum incorporating aspects that are positive to employment creation
12. Repayment schedules and mode of payment
13. Categorizing prospect borrowers
14. Interest on borrowed funds
15. Funding for Loan scheme staff
16. Identification of beneficiaries
Elaborating on the factors above
1. The sustainability of the scheme
The sustainability may be determined by at least four factors:
I. A sound and re-newable source of funding to keep fueling the scheme given the potential number of prospect borrowers;
II. Repayment schedules and emphasis to ensure recovery;
III. Having a Loan infrastructure that is credible to prospect funding organizations;
IV. No political interference where borrowers may see loans as political bribe for votes and endorsement of Government policies.
To elaborate on sustainability factors:
1) A sound and re-newable source of funding to keep fueling the scheme given the potential number of prospect borrowers, it is very important to have a sound basket from which to get initial funding for the scheme given the number of beneficiaries and this fund should have sound input every financial year in the Government budget.
2) Repayment schedules and emphasis to ensure recovery.
What needs to be unique about the Student Loan Scheme in Uganda is who the borrower (s) should be. This is against the background that many graduates take a number of years before getting employment which is viable. Given this position, the parent/benefactor should be the major borrower and the student a 2nd party. The idea here is that the parent/benefactor has some income out of which a convenient repayment schedule can be agreed on either monthly or seasonally. This means that beneficiaries under this category can ensure that the loan balances are constantly reduced to avoid th fund having funds whose repayment has to be awaited up to when the student has graduated.
2ndly, reduce the liability that would be outstanding if the student left the higher institution of learning with the principal amount all outstanding and interest when even employment is no sure deal.
As long a potential borrower has a parent/benefactor who has income, repayment should immediately start but on agreed and manageable terms by the parent/benefactor.
The recovery has to be emphasizes and this calls for parents/benefactors to open Standing Orders with credible financial institutions that will remit the agreed on installments.
Where three installments payments are not forthcoming without a sound reason, the loan may have to be terminated.
iii. Having a loan infrastructure that is credible to prospect funding organizations.
Uganda is not likely to stock the student loan scheme with such funding that is capable to meet the demand. This calls for International funding organizations. These organizations may give a grace period but funds ought to be paid back. To lend money to Uganda, they may 1st have to ensure that recovery is possible. It is against this background that the loan infrastructure has to be convincing to such organizations. It should be financially credible not politically driven.
iv. No political interference where borrowers may see loans as political bribe for votes and endorsement of Government policies.
There have been attempted schemes to lend money to Ugandans, one such scheme is ‘Entandiikwa.’ It is absurd that Government may have put about shs 12bn into this scheme and it is now dead! This is mainly because of the motive by potential borrowers where the money was seen as gifts to them. From the word go, the politicians’ role should be to see a stock of funds in place and that the scheme can take off sustainably and have it in the hands of those entrusted to run/manage it without external influence. That way, the scheme has chances of surviving, short of that, it will die a natural death as other schemes before it; and unfortunately, Government has no credit to it when such a scheme is started on wrong premises such that it eventually dies a natural death.
2 Who should be the borrowers?
I. Currently, a student registers for private sponsorship when he/she has a parent/guardian who can foot the bill. So, it should be this person who has some income with the major objective of the scheme being able to accommodate his/her cash flow to ensure that the beneficiary student is not discontinued due to failure to meet the fees obligation timely.
II. There are instances where we have complete orphans who may not have potential benefactors who can meet their tuition at higher institutions of learning. Such category may be taken as the borrowers and may only be able to meet re-payment when they have completed their courses. However, in such instances, the student potential beneficiary may not be left alone in making a choice of what course to take more so when the student may offer a course where prospects of employment are very uncertain a factor that could lead to default of the loan.
3 Whether a partial or full tuition loan
Some assessment has to be done of the financial needs of potential beneficiaries meaning that some beneficiaries may apply for partial loans.
4 The number of beneficiaries to student loans
When a student loan scheme is implemented, it is very important to know how many students may be beneficiary. This scheme should be open to all students with such grades that qualify them to post Higher School institutions of learning in Uganda. This is a great challenge given the numbers. The scheme should however not accommodate people with post Higher School training, say the holders of diplomas who may be in position to have employment out of which higher education may be funded.
It is true, the number of potential beneficiaries is very great which calls for a very big initial amount out of which loans can be made and ensuring that categories that can make some re-payment effect the installment immediately they are due so that the fund remains liquid and sustainable as well as credible.
5 Identity of the scheme
The Student Loan Scheme in Uganda needs to have its own identity. The copying what other schemes do will not work for the Uganda scheme. That is why given the problems of getting jobs for graduates, the need for financial bail out all agitate for a unique scheme where the borrower (principal) is the parent/benefactor and the immediate repayment of agreed upon installments through a credible financial institution using a Standing Order arrangement.
A workable student loan scheme is one that learns a lesson where even in countries with low unemployment levels, loan recovery has problems. In Uganda case, the administration should be eased hence the incorporation of credible financial institutions in the loan recovery and ensuring monthly or periodical standing order payments from majority of the beneficiaries.
6 Employment prospects of students on graduation
It is true; some students are not well advised about the employment prospects of the courses they pursue. In this case, it will be absolutely important for the potential borrowers to be availed information about the job market. The courses where employment chances are big should be encouraged.
The loan scheme may have a few students who have parents/benefactors without ability to meet loan repayment. A few in this category may be given opportunity to pay after completing their courses, however, they ought to offer course with prospects of finding some employment on completion.
In Uganda, many science based students stand a chance of getting employment without taking so long after graduation as not many students offer them relative to arts combinations.
Parents/benefactors who get as little as shs 250,000 a month may get salvation through the scheme which for example may allow that they pay say shs 50,000 a month as deducted from their salaries, which is just a dream as of now that a salary earner with shs 250,000 can actually sponsor a student at the University.
7 Experiences of other countries
Many countries with student loan schemes have problems of recovery from students after graduation. Uganda has two or three unique aspects. That is, the demand for the scheme is so high given the general poverty levels in the economy. Second, the employment creation is so low given the numbers already unemployed and the job creation rate in the market. These two mean that the scheme has to grow its own identity and avoid mistakes of related schemes elsewhere by avoiding politics to override credibility and sustainability. Our education system as of now has the problem of encouraging mostly the academics; hence other aspects which would help employment are left out or not catered for. It is not unusual for a child to leave school when he cannot even grow cabbages! In which case, even if the land resource for the family is available, such a one cannot benefit appropriately from its utility.
8 How parents can contribute to the scheme prior to students joining it
The sustainability of a student loan scheme in Uganda may greatly be enhanced if parents are encouraged to start savings which may help or act as a backup for the tuition of their children when need arises.
It is true that the biggest challenge the student loan scheme in Uganda faces is the amount of money needed to run such a scheme to the satisfaction of potential beneficiaries who are very many. In the circumstances, if parents are encouraged to save for each of their child, with the scheme early enough, there would be a stock of money to help bail them out when the child is due to join higher institutions of learning. So, a focus of higher studies should be made early when the child is still in lower classes.
9 Politics interfering in sustainability
The moment politics interferes in the scheme then sustainability will become history. The best Government can do is to ensure the creation of a credible scheme and leave it to technical persons who have banking background among other abilities to manage it. That way, when the scheme is well constituted, chances that it will not be part of history soon will be nearly guaranteed. It is true that most parents would be happy with a scheme which recognizes them as the ones with the liability to meet the tuition, and can meet agreed on monthly or periodical installments. In this case, it may be no big problem meeting 3 years’ tuition in 6 years. It is true that given the Uganda circumstances, to have a graduate with an outstanding balance of say shs 10m on graduation before starting work, there may be no incentive but worries, and you may not rule out suicide of a graduate is unable to make own ends meet yet there is a big liability at hand for him.
10 History of prospect borrowers
The scheme is likely to have a challenge in determining who should be beneficiaries. This may be eased when some little bio-data of the applicants is got. Schools attended for primary; O’ level and HSC may all need to be looked at such that given the competition, a student from schools which are for the rich may not be given priority when those from poor background are available. Many parents whether rich may wish to benefit from the scheme which is unfair.
11 Change of the curriculum incorporating aspects that are positive to employment creation.
The Ministry of Education needs to revisit the curriculum from primary schools through to secondary level. One problem of employment is that students on graduation don’t have any skill worth talking about. At primary level children need to do scientific gardening where schools have some land, at least some crops ought to be grown scientifically such that children take this ability with them on leaving the school. There is need for technical aspects at secondary level; Carpentry, Cookery, Technical drawing just to mention some. It is also important to incorporate aspects of marketing at secondary level.
12 Interest on borrowed funds
i. There should be a membership fee payable by all who qualify for the scheme which could be shs 100,000 and payable once;
ii. 1% Commitment fee for whatever Semester/termly fees advanced;
iii. Interest at 10 – 15% per annum can suffice on loan fees advanced;
iv. The above (i – iii) may help the Loan Scheme Board to meet its own costs and not be a drain on Government for funding its operations.
By William Kituuka