Thursday, July 22, 2010

A Student Loan Scheme in Uganda: What can work and what cannot

12th October 2002
The Hon. Minister
Ministry of Education & Sports
P. O. Box 7063,
Thru: The Public Relations Officer
Ministry of Education & Sports
Dear Hon. Khidhu Makubuya (Dr)
RE: The Educational Loan Scheme
The Executive Committee of Makerere University Private Students’ Parents’ Association (MUPRISPA) Ltd has had opportunity to read the New Vision newspaper of October 9, 2002 in which some article reported about the Universal Secondary Education (USE) and the Educational Loan Scheme. We are interested in some of the points raised in the article regarding the Educational Loan Scheme viability and who to lend the monies not forgetting the issue of the Consultant.
The subject of the Educational Loan Scheme has all the time been on the top of the agenda of the Association business. We are convinced that due to the average low incomes of he majority of Ugandans who would love to see their sons/daughters acquire some University education, the issue of the level of tuition fees remains a major concern. Having seen that a number of students have had to drop out of the University after failing to raise the tuition fees at some stage, we thought it ripe and timely to give our input on a “Sustainable Students’ Loan Scheme in Uganda.” This was after considering the situation on the ground where majority of parents cannot afford to raise the required tuition and accommodation fees in Universities.
So, we are convinced that our document should be considered for discussion on the way forward for the Educational Loan Scheme. It may be wasteful on the part of Government to use the scarce resources to start looking for a consultant on the loan scheme.
We are consultants in our own way. We considered banking principles, acceptable principles of micro finance, and the capacity to pay back the funds as the basis of our proposal. We therefore propose that parents and government form a partnership, where the government advances the fees to parents/benefactor in a lump some per semester/term and a parent pays back the loan in agreed installments.
The parent should have some income out of which a pre-determined amount on a monthly basis should be repayable as is the case with micro finance with the view of making it easier for any parent/benefactor to pay from his/her meagre income a fairly manageable amount over a pre – determined period of time.
We advanced the point that educational loan schemes where they exist with unemployment levels as high as is the case of Uganda, the performance has not been that good. It is against that argument that we propose the parents/benefactors as the borrowers so that we completely rule out the employment or unemployment of the student after graduation, which would make the scheme more unfeasible and unsustainable. Secondly, on this point, we earlier communicated and said that already a number of students who had been helped had in a number of cases absconded from the responsibility. This has been particularly so where students have reached out to the lecturers for secondment of their post dated cheques which they present so that they are allowed to sit for exams. Information available to us is that some lecturers have had the face value of the cheques recovered from their salaries after the students have disappeared! At least we were informed about Rev. Father Kanyike (Dr) and Rev. Matovu (Dr) to mention a few. So, as far as we are concerned, the funds should be lent to parents/benefactors with terms like failure to pay 3 installments among others leading to the termination of the facility of any defaulter.
We also proposed an Educational Loan Secretariat to oversee the Educational Loan Scheme nation wide.
The Educational Loan Scheme cannot fail given the background we have property discussed in our attached paper. It is no where comparable to the Entandikwa scheme given our approach, and we are convinced that a competently qualified Educational Loan Secretariat can easily run it as a micro finance establishment given clearly set rules.
What our paper left to the other parties’ input was how to handle student/graduate cases in case of death before the clearing of the loan facility. It would be hard on the parent/benefactor to keep paying installments in this case and on this there is need for expert views/consensus or may be some insurance arrangement needs to come into play.
We also made a proposal to the effect that some subscription fee be paid by the beneficiary and this was proposed as shs 100,000 and then a commitment fee at 5% per semester tuition fees. This amount when contributed would make it unnecessary for the beneficiary to meet interest on the monies received. Secondly, it would provide stock out of which administrative expenses would be met and at the same time, the reserves out of this would help in meeting periodical payments to the creditor. We believe that if our guidelines are observed by the government the Educational Loan Scheme could be very successfully managed.

Thank you
William Kituuka & Peter Kampororo – Chairman & Treasurer

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