BRD has made great progress in better student loan management

BRD created a specific department to manage the student loans

Since the Rwanda Development Bank (BRD) took over the management of student loans and bursaries (in accordance with the law No. 44/2015 of 14 September 2015, and the subsequent agreement between the ministry of education and BRD), the facility is run in a better and more efficient way than ever before.

BRD’s key responsibilities include the efficient management of disbursement and recovery of student loans, the establishment of an education savings scheme and investment in education.

Since taking charge in early 2016, the bank has been addressing the issues affecting the university loan scheme, and is working tirelessly to see that the fund, which channels over Rwf 29 billion in loans for tuition and living allowances to students in public universities, becomes self-sufficient in the long-run.

This means that the bank is not only charged with disbursing the money but also has to ensure that the beneficiaries pay back on time as agreed in their contract.

No contracts

The student loan program started in the 1980s and was first managed by the ministry of education, then by the Student Financing Agency of Rwanda (SFAR) and the Rwanda Education Board (REB) before BRD took charge of it.

That latest change of management envisaged not just to make the disbursements more efficient, but also to improve the loan recovery rate.

Indeed, it was only in 2007, more than 20 years after the launch of the scheme, that loan recovery became an integral part of the management of the program; as a result, many beneficiaries in previous years did not sign a contract or leave any personal information that could help to follow-up on reimbursements.

Due to such issues related to the management of the scheme in past years, loan recovery didn’t improve that much between 2007 and 2015, and as a result the arrears amounted to Rwf 75 billion by the time BRD took over.

Updating information

BRD created a specific department to manage the student loans, and its major focus in 2016 was to fully exploit the database inherited from REB, and subsequently intensify data collection from higher learning institutions to update and complete the information.

The student loan department at BRD thus worked closely with REB to assess the existing data and gaps, one of the most common of which was the absence of national ID number or the exact amount of the loan.

BRD also sent invoices to loan beneficiaries, and contacted over 10,000 employers requesting the names and gross salaries of their employees in order to trace past student loan beneficiaries.

The bank received feedback from around 500 employers, which helped to draw up an initial list of some 2,700 beneficiaries who are now paying back their loans to BRD through their employers, which is a major milestone.

The bank has a target to reach out to an additional 4,900 people to start repaying their loans by the end of this year.

The data provided to BRD from REB was up to date until 2013 and consisted of about 55,000 former beneficiaries. Considering that between 5,000 and 6,000 students graduate each year, another 15,000 (beneficiaries between 2013 and 2015) should be added, giving a total of 70,000 today.

17,000 of those on the REB list were already paying back their loan, and with the 2,700 which BRD managed to add last year, there are now nearly 20,000 out of a total of 70,000 beneficiaries in the process of settling their loan.

That means that there are some 50,000 beneficiaries remaining which BRD will have to contact to start the reimbursement process.

What to pay back and at which interest rate?

According to the law, student loan beneficiaries who completed before 2013 pay back at an interest rate of 8% of their gross salary.

However, the actual amount to be paid back depends on when the beneficiary studied, since the regulation has changed several times over the years.

  • People who studied up to 1994 were (and are) supposed to pay back living allowances and research fees, but the latter only if they worked for the government for more than five years.
  • From 2000 until 2008, beneficiaries had to pay back only the monthly living allowances (set at Rwf 25,000 per month since 2000) plus the memoir fees of Rwf 100,000.
  • Between 2008 and 2013, those who followed STEM (Science, Technology, Engineering and Mathematics) courses would pay back 25% of the total tuition fees and living allowances, while those in other sections were required to reimburse 50%.
  • Since 2013, the entirety of tuition and living fees has to be paid back, but the amount received depends on the family’s Ubudehe classification. It is assumed under the law that the Ubudehe categorisation is the result of the parents’ financial status, and should not affect the beneficiary student’s ability to pay back after graduation and getting a job with their diploma.
Way forward for 2017

For the year 2017, BRD expects to meet its targets for student loan reimbursements while at the same time ensuring smooth and timely disbursements to students.

A Management Information System is already in place that will be integrated with the National Identification Agency (NIDA) and other institutions such as the Rwanda Social Security Board (RSSB) for faster identification of beneficiaries supposed to repay their loans.

On the disbursement side, students in all public universities today receive their monthly living allowances on time through an account in any commercial bank.

Thanks to BRD, the bureaucracy that often led to delays in disbursement has been ironed out and students can now focus on their courses, reassured that all their expenses are covered.

 

Read this article and more in issue n° 73 of Hope Magazine.

  • By Hope Magazine
  • Posted 4th April 2017

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